Deputy-Governor of the Bank of Ghana Dr. Maxwell Opoku-Afari has attempted to assuage fears emanating from the soaring inflation, saying the bank’s forecast gives some hope that it will soon peak and start falling – though there are still upside risks.
Speaking on behalf of the deputy-governor during a media training workshop for the northern zone in Tamale, Director of Research, Dr. Phillip Abradu-Otoo, outlined factors such as ex-pump petroleum prices and the cedi’s depreciation against major trading currencies as main drivers of the present high inflation.
Though inflation hit 31.7 percent last month, the deputy-governor expressed optimism that the rate at which prices are increasing will soon hit its highest point and start trending downward.
“Headline inflation has shifted well above the upper band of the medium-term target, driven mainly by food prices, transport costs, upward adjustments in ex-pump petroleum prices and pass-through of exchange rate depreciation… Inflation was 9 percent just a year ago in July 2021.
“The Bank’s forecast indicates that inflation will peak later this year and begin trending back toward the medium-term horizon. There are however significant upside risks to the inflation outlook – including increased commodity prices, particularly crude oil; heightened supply chain disruptions; and the over-20 percent increase in utility tariffs set to kick-in from 1st September 2022. These are all sources of noise to the economy and the conduct of monetary policy,” he said.
To tame the galloping inflation, the Bank of Ghana recently increased its policy rate by 300 basis points, citing inflation outlook risks as the main reason for the Monetary Policy Committee’s decision.
On revenue
Commenting on the GH¢22billion overdraft granted by the Bank to government – which has become a matter of controversy after the minority members of Parliament raised an alarm that it was fresh money printed – Dr. Opoku-Afari, while denying the allegations, said support from the central bank became necessary due to the absence of access to the international capital market which has left a huge gap in the 2022 budget.
“As we are all aware, significant challenges remain with executing the 2022 budget as revenue mobilisation has not kept pace with projections, thereby creating financing difficulties. In the absence of access to the international capital market, and given the constrained domestic financing, the central bank overdraft has helped to close the financing gap – as reflected in the mid-year budget review.
“The fiscal challenges have also accentuated debt sustainability concerns. It is expected that the ongoing policy discussions with the IMF will help address the underlying macroeconomic challenges, restore fiscal and debt sustainability, and re-anchor a sustainable balance of payments,” he said.
