Inflation Nears 10%, Surpasses Gov’t Goals
MANAGUA – The government’s goal to keep inflation rates in the single digits this year has already gone out the window, following the Central Bank’s announcement last week that accumulated inflation as of May 31 has already reached 9.43 percent.
Government economists later said that this year’s accumulated inflation rate will most likely equal last year’s 16.8 percent, the highest in the region. Inflation hits the poor the hardest, making food and other basic items more expensive – a dangerous situation in a country where 80 percent of the population lives on $2 or less a day.
Despite the grim forecast, Central Bank President Antenor Rosales says all is not lost. Rosales pointed to a 16 percent increase in remittances and tourism this year, and a 25 percent increase in exports as driving forces for the economy, which he predicts can still end the year with 4 percent growth.
But to reach those growth goals and keep inflation from soaring, the Nicaraguan government will have to increase food production, provide farmers with credit, maintain the subsidy for urban busses, reduce taxes on wheat imports and fully execute public spending programs, Rosales said.
“If public investment is executed according to scheduled, we’ll have a very clear affect on economic growth,” Rosales told reporters June 11. “One of the government’s principal anti-inflation plans is to comply with public spending plans.”
The government of Daniel Ortega has been criticized in recent months for under-executing public spending in areas that are crucial to economic growth. Ortega, in a televised address to his economic team June 12, instructed his advisers to study the 2008 budget thus far and find out which programs are being carried out properly and which are not.
The perception that the Ortega administration is under utilizing budget funding is only part of a larger image problem facing a government that’s having a hard time getting its message out to the public. The administration’s media policy of only talking to official Sandinista news outlets has largely backfired on the government, leading to widespread claims of secrecy and lack of transparency.
The communication problem, however, has created more than just an image problem
– it’s also affecting the economy, Rosales says.
“One of the problems we have is speculative inflation, which occurs when people don’t have all the information,” the Central Bank president said. “We have to inform people better.”
In past weeks, Rosales has questioned the government’s strategy of talking only to Sandinista media.He says that efforts such as the government’s news Web page, www. elpueblopresidente.com, just isn’t doing the trick in a country where only 3 percent of the population has access to the Internet.
Rosales has called for new spirit of cooperation with the independent media outlets – a request with strong political implications in an administration that has become increasingly hostile toward the non-official media. Ortega has blasted the leading daily La Prensa as “diabolical,” “oligarchic” and “shameless sellouts,” and recently referred to the El Nuevo Diario newspaper as “El Nuevo Diablo” – or the New Devil.
Despite the president’s personal feelings toward the media, Rosales said it’s in the country’s best interest to bring them into the fold so that the government can get its message out instead of fighting with the media.
The more people understand the situation, the more the government can prevent fear and speculation from driving up inflation, he said.
“Given the characteristics of the Nicaraguan reality, information is essential to give people knowledge so they can make decisions,” Rosales said. “The problem with information here is structural and has to be resolved. We have to find a mechanism to help the citizens know what we are doing as a government, and allow them to give opinions.”
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