Finance Minister Dr. Kwabena Duffour has dismissed criticism of the formula adopted by the government to keep prices of goods and services from rising too quickly.

Inflation which measures general movements in price levels recorded 10.68 percent in May, having declined continuously for eleven months and the government is patting itself on the back.

But some economists have suggested that slowing down inflation by tightening national spending as per the government precent policy could stifle the growth of businesses and the economy as a whole.
“What we have been doing is that we have been putting the breaks on spending not only by government but through the increased taxation, we are also putting the breaks on spending by the private sector and citizens as a whole,” Dr Joe Abbey of the Centre for Policy Analysis told Joy Business.

He said there is always a cost to pay running an austerity policy anywhere in the world, adding, such a policy has led to strikes in parts of the world.

“In Ghana what we are collectively paying for this is that we are not producing at the same rate as we would have produced.”

But the finance minister disagrees, saying the argument that growth is being sacrificed for the sake of reducing inflation is untenable.

Citing a scenario in 2001, Dr Dufuor said inflation at the beginning of that year was 42 per cent but by December in the same year inflation had dropped to 21.5 per cent and demanded to know if there was a commensurate increase in economic growth in that year.

He said the stable currency is responsible for the reduction in inflation.

Source: Myjoyonline.com/Ghana