The International Monetary Fund (IMF) has predicted Ghana’s inflation rate should decline from 16.9 per cent in August to 13.5 per cent by the end of the year.
The Head of IMF’s Ghana Mission, Joël Toujas-Bernaté, in a video conference told reporters the Fund expects Ghana to reach its inflation target by the middle of 2017, which is around 8 per cent. Ghana is also projected to end the year with a Debt-to-GDP ratio of below 68 per cent from the high debt level of 72 per cent.
“The central government debt-to-GDP ratio is projected to decline around 72 per cent of GDP in 2015 to below 68 per cent of GDP in 2016. It’s a substantial reduction which is about four per cent of GDP and with regards to inflation, we project the recent decline that we have seen in July to continue to the end of the year and we expect inflation to end in 2016 at around 13.5 per cent. Part of the reasons which explains why inflation has remained more elevated than we initially projected were the increasing electricity tariffs and new taxes on petroleum products which took effect in January this year. So, we expect inflation in January 2017 to drop more significantly because the base effect will disappear by then,” Mr Toujas-Bernaté stated.
Ghana is under a three-year Extended Credit Facility programme with the IMF meant to restore fiscal stability and has already received three tranches under the programme. Mr Toujas-Bernaté was impressed with the progress Ghana was making under the programme but added that the economic outlook remained difficult and there was still the need to continue with ongoing reforms and fiscal consolidation.
“Also positive achievements included the stabilisation of the exchange rate over the past year. As you know, the cedi against the dollar has been stable since September 2015. …Also we noted the good steps being taken to start addressing financial situations of state-owned enterprises [and] in the energy sector including the restructuring of the debt of VRA and TOR with domestic banks. But the economic outlook remains difficult, growth has weakened, inflation remains elevated and we have also seen an increase in non-performing loans in the banking sector. So, there is definitely the need to continue the implementation of a wide range of structural reforms to further entrench the gains achieved so far and these reforms should focus on broadening the tax base and enhancing tax compliance, further strengthening the control of the wage bill, further enhancing public finance management and also addressing risks in the financial sector…”