Ghana's gov’t surpasses end-year inflation target

Government of Ghana has achieved and surpassed its 2010 end- year inflation target, with the figure coming in at 8.58 percent and 0.22 percentage points better than the target of 8.8percent.

The December figure is also 0.50 percentage points lower than that of November 2010 and the lowest recorded in 18 years.

The decline was mainly driven by the non-food group of the consumer basket, which recorded a figure of 11.22 percent, higher than the food group which registered a figure of 4.50 percent, Mr. Ebow Duncan, Head of Economic and Industrial Statistics of the

Ghana Statistical Service, said at a media briefing in Accra.

Analysts are of the view that on average the economy has been resilient, being able to withstand shocks - especially during the year under review.

But mounting price pressures could end the disinflationary trend in January, said the government and economic analysts .

"The chances of inflation going up in January are 80 to 90 percent," said Mr Duncan citing a government’s hike of retail fuel prices by 30 percent with its pass-through effect on transport charges and other prices early this month.

Critics warned the fuel hike will hurt ordinary Ghanaians and small business by rippling through the transport and manufacturing sectors, but analysts said the move could boost investor confidence by showing that government is willing to make tough choices to tame its budget deficits.

The Committee for Joint Action (CJA), a political pressure group on Wednesday condemned government for the increase in prices of petroleum products.

It said “Government is using the same tired excuses of rise in crude prices on the world market, the need to remove government subsidies, recovering the TOR debt and the increase in the profit margins of fuel distributors in the country.”

Finance and Economic Planning Minister, Dr Kwabena Duffuor welcomed the drop in inflation rate , the lowest ever under any government in the nation’s recent economic history.

“The steady decline in the inflation rate is attributed principally to the continued monetary restraint, prudent fiscal management by the government, good agricultural policies (causing good food harvest) and stable commodity prices,” Dr Duffuor explains in statement issued in Accra.

He dismissed claims from some quarters that the drop in the inflation rate is attributed to lack of spending on the part of the government, adding that the Mills administration has met all its financial obligations and has even moved to clear a substantial part of the huge arrears to contractors left behind by the previous government.

The Finance Minister said that “the drop in the rate of inflation to 8.5 per cent bears testimony to the stability of the economy which the government has been pursuing since January 2009. Now that the economy has stabilized, fiscal year 2011 and the medium term will see a strong stimulation of growth and job creation.”

“We’ll pursue a broad based and job-creation economic growth agenda to remove Ghanaians out of poverty,” Dr Duffuor added.

Inflation reached 18.1% in December 2008 as a result of excessive spending by the previous government.

This led to a build-up of strong inflationary pressures in the economy, which caused the inflation rate to continue to rise in the first half of 2009, reaching an all time high of 20.7% in June.

The inflation was also fuelled by the weakened domestic currency, which lost more than 30% of its value against the dollar between July 2008 and June 2009.

Since June 2009, however, the inflation rate has been on a steady decline, reaching 16% in December 2009. By June 2010, the inflation rate had dropped to 9.5% and subsequently to 8.5 per cent in December, 2010.

"The 8.58 percent outturn is historically low and was achieved on the back of fiscal consolidation, as well as fairly stable food prices and exchange rates," said Sampson Akligoh at Databank Financial Services in an interview with Reuters.

"This should support stable interest rates for at least the first quarter of 2011 even as developments in the economy point to a build-up of inflationary pressures."

The central bank's Monetary Policy Committee last month held the prime interest rate steady at 13.5 percent, after shaving off five percentage points since late 2009.
The next Bank of Ghana Monetary Policy Committee meeting is expected in February.

Government’s key target this year is to grow the economy by 12.3 percent including oil from the targeted 6.5 percent last year, while bringing inflation down further to a single digit of 8.5 percent by end-December 2011.

Inflation rates in the regions for December ranged from 5.97 per cent in the Volta Region to 13.05 per cent in the Greater Accra Region. Six regions - Volta, Western, Brong Ahafo, Ashanti, Central and Eastern - recorded inflation rates below the national rate of 8.58 per cent.