Gov’t committed to 14.5% inflation by year end

By Osabutey ANNY
kwaku.express@gmail.com

Government says it is determined to ensure that inflation reduces to 14.5 percent by the end of the year, Kwabena Duffour, Finance Minister, told Parliament on Tuesday.

Presenting the government’s midyear review of the 2009 budget and supplementary estimates for approval, Dr. Duffour said inflation began building up in 2008, rising to 20.5 percent by the end of March, 2009.

Giving the breakdown, Dr. Duffour said it hovered around 20 percent with a rate of 20.6 percent recorded in April 2009, 20.1 percent in May 2009 and 20.7 percent in June 2009.

He said the increase in the month of June reflects what he described as the “pass through effect of the petroleum price increases which caused the monthly non-food prices to rise by 3.9 percent in June 2009 compared to a rise of 2.4 percent in May 2009.”

But recent figures have shown a slight fall- to 20.5 percent in the month of July, 2009 which has prompted government to set its eyes on 14.5 percent by the end of the year.

The rationale behind the review and supplementary budget, Dr. Duffour explained, is to share some lights on the performance of the economy since the government took office with Parliamentarians, as well as “revise our budget estimates based on current information.”

“The aim of this review and supplementary budget is to seek Parliamentary approval to commit the required additional resources to address the inadequacy of the amount of monies approved under the 2009 Budget.”

He said the government took over from the NPP government a “rundown” economy which was “characterised” by “severe imbalances that resulted in a huge public debt and a ballooned overall budget deficit of 14.5 percent of GDP.”

He explained that the huge deficit did not include expenditure arrears and commitments estimated at about GH¢1.7 billion, equivalent to 9.7 percent of GDP for 2008.

“The deficit was largely driven by a lack of prudence in public spending and misplaced priorities,” he said adding; “the economy of Ghana at end December 2008 was not as robust and resilient as we were made to believe.

Touching on macroeconomic developments, Dr. Duffour said current indicators show a slowdown in the “pace of the global economic contraction and current signs do not point to any major recovery.”

He said the domestic front also witness some levels of uncertainty at the beginning of the year, as a result of the large “macro-economic imbalances and imbalances and the global financial meltdown.”

He was however quick to add that things are beginning to shape up positively, giving markets and policy makers enough hope, as well as raising their confidence levels regarding to performance of the economy.

“The Ghanaian economy is beginning to witness some consolidation of the gains associated with both fiscal and monetary prudence.”

On the banking sector, Dr. Duffour said the sector continues to register some positives terming them as remaining “fairly liquid.” He said the sector registers “strong asset growth, increased competition and improved profitability during the period” adding that the sector has proven to be resilient in spite of the global financial crisis.

“It is well capitalized with no indication of direct exposure to distressed financial institutions or toxic financial assets in other parts of the world. The banking sector has grown and diversified, with banks now offering a wide-range of financial products. “

According to the finance minister, the non-bank financial institutions and microfinance have also recorded such positives and continued to expand their products and operations to the countryside.

The country’s export, he explained, amounted to US$3,003.8 million, compared with US$2,845.8 million during the corresponding period of 2008. Receipts from cocoa beans and products amounted to US$1,061.0 million, an increase of 16.6 percent over what was recorded during the corresponding period of 2008.

Total receipts from gold exports for the first half of the year amounted to US$1,213.9 million, indicating a marginal increase of 1.2 percent over US$1,199.2 million recorded during the corresponding period of 2008. He noted that the growth in gold exports was on the back of what he described as “marginal increase of 2.0 percent in volume, on year-on-year basis, to 1,351,798 fine ounces.”