Provisional data from the Bank of Ghana (BoG) have showed that the government is being prudent in its spending after decades of weird spending .
According to the Governor of the BoG, Dr Henry Wampah, fiscal consolidation continued to be on track. This is positive sign of growth.
The data on the fiscal outturn for 2015 showed a significant contraction of the deficit to 7.1 percent of GDP compared to 10.2 percent in 2014.
He added that continued commitment to the budget implementation coupled with the tight monetary policy stance is expected to offset some of the inflation pressures through weaker aggregate demand.
However, Dr Wampah warned that uncertainties regarding movements of crude oil prices and tight external financing conditions may pose significant risks to the budget in terms of lower oil revenues as well as financing of the fiscal deficit.
“The provisional current account deficit in 2015 improved to 7.8 percent of GDP, relative to 9.5 percent in 2014. This favourable development was attributed to an improvement in the services account which outweighed the worsening trade deficit as commodity prices softened”, he stated.
For the first three months of year 2016, Gross Foreign Assets as at end February was US$5.4 billion, equivalent to 3.1 months of import cover.
But the global environment continues to be plagued by uncertainties as growth prospects weaken in the advanced and major emerging market economies.
This, in turn, has slowed global demand, resulting in volatilities in the commodities and financial markets amid tightened financing conditions, although the trend has reversed recently.
The transmission of risks emanating from these developments has implications for both the fiscal and balance of payments outlook.
On the local currency market, since August 2015, the local currency has been relatively stable, reflecting the tight policy stance, improved liquidity on the foreign exchange market and the renewed investor interest in domestic debt instruments.
As at March 17th, the Ghana cedi had depreciated by 1.4 percent compared with a depreciation of 11.2 percent in the same period last year.
The Bank will continue to use appropriate measures to reduce exchange rate volatilities to support the disinflation process, Dr Wampah assured.
In assessing the current economic conditions, the BoG’s Monetary Policy Committee views the risks to inflation and growth outlook as balanced.
Hence, the rationale behind the keeping of the policy rate at 26% for the second term this year, stressing there is the need to maintain the current monetary policy stance which together with fiscal consolidation would help bring inflation further down, Dr Wampah said today.
African Eye Report
