Business News of Sunday, 3 July 2016
The US Ambassador to Ghana, Robert Jackson, has told Citi Business News of a decline in inflation soon, as Ghana sticks with the IMF program.
In the Ambassador’s view, the Ghanaian economy has witnessed relative stability compared to the turbulence that characterized it for a greater part of last year.
“Since I have been here, I think dumsor has largely been addressed in the short term but there is much more work to do and the currency is stabilized as we are not seeing depreciation and as long as Ghana sticks with the IMF program, we will soon see inflation going down and more economic growth going forward,” Mr. Jackson told Citi Business News.
The reeling power sector, depreciating local currency, high interest rates and inflation coupled with high taxes were among issues that saddled Ghana’s economy for a greater part of 2015.
The effects were staff rationalization and the laying off of some workers in extreme cases. The development also compelled government to seek an external help when it engaged the International Monetary Fund, IMF, for an extended credit facility.
The program will see the Fund provide assistance up to 940 million dollars in three tranches. Ghana has so far performed satisfactorily in all three reviews of the program.
In the latest review, the Head of the IMF mission to Ghana Joel Toujas-Bernaté said, “the implementation of the program remains satisfactory. We have seen most of the targets and performance criteria in the end of 2015 being achieved with just done small exceptions. The economic performance has been slightly better than expected.”
He added, “The debt to GDP ratio last year increased slightly further to about 72% of GDP but the base of data accumulation has slowed down. What is very important is looking out for this year because the objective is to achieve a primary surplus for the fiscal deficit, for the first time in almost a decade, this will allow the debt to GDP ratio to decline in 2016 and then we would see much more.”
Inflation increases to 18.9 percent in May
Ghana’s inflation currently stands at 18.9 percent. The rate represented 0.2 percent increase over the 18.7 percent recorded in April this year.
Meanwhile, the rate of inflation for April, that is 18.7, had declined from that recorded in March which stood at 19.2 percent. The previous months, January and February recorded inflation rates of 19 and 18.5 percent respectively.
The inflation figures for the first five months are still below the central bank’s target of achieving a single digit inflation of 8 percent plus or minus 2 by the end of the year.
IFS criticizes BoG’s inflation targeting policy
Meanwhile, the Institute for Fiscal Studies (IFS), has described the approach used by the Bank of Ghana (BoG) in taming inflation in the country as ineffective.
According to the IFS, there are shortcomings in the country’s inflation management where the BoG seems to over-rely on demand management tools to tackle a problem that is essentially supply or structurally driven.
The Executive Director of the Institute for Fiscal Studies, Prof. Newman Kwadwo Kusi has therefore urged the central bank to consider innovative ways like using micro-economic indicators in addressing inflation.
Prof. Kusi argued that the central bank’s decision to increase the cost of capital or mop up liquidity from the system as a way of reducing demand or consumption to sustain the pressure on prices is a misplaced approach.