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Households reduce spending as global inflation pushes prices up

Source The Ghana Report

It appears Ghana is not the only country suffering from rising prices of goods and services, as a recent survey has revealed that consumers in other jurisdictions, including the United Kingdom (UK), are cutting back on food and car journeys to save money.

Some have resorted to long walks while their cars remained parked, cutting meals to twice daily or switching to cheaper ingredients as coping strategies due to recent developments.

Other measures include going on fewer nights out or getting a haircut less often.

A BBC-commissioned survey showed that out of a pool of 4,011 people, 56 percent admitted to buying fewer groceries and skipping meals just to find their ground.

The findings also reveal the widespread impact of prices.

Just as Ghana’s inflation went up by 27.6% to hit a new  18-year peak, the UK is also recording rising prices at their fastest rate in the last 40 years.

The survey further revealed other areas where households have targeted drastic cuts in expenditure, including clothes and socialising.

The huge impact of the rising costs of living has affected the general well-being of UK residents as some have poured out numerous complaints that their mental health has been affected.

Even though the UK government has offered support, two-thirds of those surveyed suggested that government aid was insufficient.

The survey conducted in early June throws light on how the economic climate affects lives and financial, physical, and mental health.

The cost of domestic energy, petrol, and food have all increased significantly in recent months, and the findings suggest more than eight in 10 people (81%) are worried about the rising cost of living.

In the latest results, two-thirds (66%) of those with worries said this negatively affected their mental health. Nearly half (45%) said their physical health had been affected.

A charity worker, Janine Colwill, from Easington, shared her frustration.

“We get together with the family every Sunday, religiously, for Sunday roast – but my family and other families are starting to grow their own vegetables. Those people who may not have worried about these things before are now worried about them constantly.

“With advances in technology, I never would have thought that people would be relying on a food bank or growing their own – and just penny-pinching,” she said.

The survey further suggests people are finding various ways to manage and save their money. The findings include:

  • Some 82% of those asked had switched off lights in the previous week to save money
  • Trips taken in the car had been limited to varying degrees in the previous six months by 72% of those asked
  • A large majority (84%) said they had spent less on their clothes at some point in the previous six months
  • About half (52%) expect to work more hours in the next six months to help to pay the bills.

Prices, as measured by inflation, are rising at a rate of 9% a year, the fastest for 40 years. Interest rates, which also affect the cost of living, were increased to 1.25% on Thursday by the Bank of England – the highest they have been for 13 years.

The situation is being driven, to a significant degree, by global factors such as the cost of oil, gas, and food.

Drivers now have to spend £103 for petrol and £106 for diesel to fill a family car, according to the RAC.

A typical household in England, Wales, and Scotland is likely to see a rise in its annual domestic gas and electricity bill of £800 in October, on top of a £700 rise in April.

Global inflation spillover impact on Ghana

The situation in Ghana is no different as consumers constantly search for an escape from the economic hardships.

At the beginning of 2022, petrol and diesel traded at an average of GHC6.30 per litre at the pumps.

However, as of 13 June 2022, the price of petrol in Ghana stood at GHC10.23 per litre, corresponding to roughly US$1.3

Similarly, the price of diesel fuel is GHC 12.34 per litre, around US$1.56.

To cushion Ghanaians against recent economic hardships, Finance Minister Ken Ofori-Atta, in March, announced a list of plans by the government to resurrect the economy, including a 15 pesewas reduction in taxes, which contributes to the build-up of fuel prices.

The government is also embarking on several measures due to economic challenges attributed to global occurrences, such as the COVID-19 pandemic and the Russia-Ukraine conflict.

Below are some interventions:

  1. The government plans to cut discretionary spending by an additional 10 per cent. The Ministry of Finance is meeting with Ministries, Departments and Agencies to review spending plans for the rest of the year.
  2. There will be a 50 per cent cut in fuel coupon allocation for all political appointees and heads of government institutions to ensure efficient use of energy resources. This measure is effective 1 1 April 2022. Fuel coupons normally account for over GHS 60 million, according to the Finance Minister.
  3. The suspension of the purchase of imported vehicles for 2022 to reduce total vehicle purchases for the year. This will affect all new orders, especially Four-wheel drives.
  4. The suspension of all foreign travels except pre-approved statutory travels or critical travels.
  5. The government plans to conclude measures to eliminate ghost workers from the government payroll by the end of 2022.
  6. The government hopes to conclude the renegotiation of the Independent Power Producer capacity charges by the end of the third quarter of 2022 to further reduce capacity payments by 20 per cent to generate total savings of GHS1.5 billion.
  7. Moratorium on the establishment of new public sector institutions by the end of April 2022.
  8. Prioritise ongoing projects over new projects to enhance the efficient use of limited public funds by finishing ongoing or stalled projects.
  9. The reduction of expenditure on all meetings and conferences by 50 per cent.
  10. Pursue re-profiling strategies to reduce the interest expense burden on the fiscal.
  11. The government also plans to liaise with organised labour to implement measures in the Kwahu declaration of the 2022 National Labour Conference. These include reforms toward addressing salary inequities.
  12. Ministers and the Heads of SOEs will also be contributing 30 percent of their salaries from April to December 2022 to the Consolidated Fund.
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