Jeff Gable addressing the audience
JEFF GABLE, Chief Economist at ABSA, has indicated that the continuous introduction of subsidies by governments in the midst of global economic challenges will prolong the effects of inflation.
Mr Gable, who is also head of the Fixed Income Currency and Commodities (FICC) Research, said governments in Africa must rather focus on slowing down demand for imported products rather than subsidising the cost.
“[In Nigeria for instance], almost all of the Federal Government’s funds that are to be set aside to pay for new hospitals, schools, construct roads and energy infrastructure, are used to subsidise petrol… Prices are high because the demand for the product supersedes supply. One of the ways of bringing the prices down is to demand less for it… Some of the subsidy programmes that exist here actually prolong the [inflation] situation,” he said.
Mr. Gable was peaking at the Citi TV, ABSA Bank Ghana and ISSER’s Cedi Summit in Accra yesterday.
Commenting also on the challenges and perspective of the global economy, particularly Russia’s invasion of Ukraine and the Covid-19 pandemic, he said the situation is pushing governments to use funds reserved for social and economic development to fund price subsidies.
He was, however, quick to add that some subsidies remain important as part of the strategies to address inflation challenges adding that, there is still uncertainty at the global level about inflation slowing down.
“Economists are moving the inflation forecasts up and up rapidly… [Economists are] uncertain whether any of these things will get better,” he added.
BY Jamila Akweley Okertchiri