Ghana’s Central Bank is under pressure to help bring down inflation stuck at about 20% but faced growing calls before a meeting on Wednesday to avoid further rate hikes that could damage growth.
The review meeting is the last to be attended by outgoing Governor Paul Acquah, who has faced criticism for not doing enough to tackle inflation despite having raised the prime rate to a five-year high of 18,5% earlier this year.
He is due to be replaced by Kwesi Amissah-Arthur, a close political ally of President John Atta Mills, who will be watched for signs that he will pursue a government goal of stemming price growth more aggressively.
Yet few believe Accra can hit a target of bringing inflation from just less than 20% now to 14,5% by the end of the year, and there have been mounting calls for the bank instead to help business cope with the economic slowdown.
”Inflation should not be the only indicator for running an economy,” said Franklin Cudjoe, director of the Accra-based Imani Ghana think-tank.
”If there’s money in the system, it will still stimulate growth so we must encourage easy accessibility of funds to businesses,” said Cudjoe, urging ”a significant drop of about 3%” in the prime rate.
Sampson Akligoh at Ghana’s Databank Research also saw potential for a rate cut, but said the bank ”may want to keep it steady to reinforce micro-economic stability towards budget goals”.
An announcement at the end of the bank’s Monetary Policy Committee (MPC) meeting is due on Wednesday, although it may be delayed until Thursday.
Emergency budget
Ghana is struggling to bring down a 2008 public deficit put at 24,2% of national output. Last month it announced an emergency budget to raise about $175-million additional receipts.
One of the few sub-Saharan economies to have a traded Eurobond, the West African country will see new revenues from oil production due to begin in late 2010.
But the global downturn has taken its toll on Ghana’s economy this year, with analysts forecasting a fall in growth to 4,5% from last year’s 7,3%.
”We have had a record of poor performance over the last four years of the central bank’s inflation-targeting policy,” said Joe Abbey of the Centre for Policy Analysis, adding that the accent should be on private sector growth and job creation.
The International Monetary Fund, which in July agreed a $1,1-billion support package for Ghana, had urged Acquah to raise rates further to tackle inflation. But that call was ignored by the July MPC meeting, which kept the prime rate unchanged.
Amissah-Arthur, a well-regarded deputy prime minister under ex-president Jerry Rawlings, has said little so far about his new role. He is expected to attend the MPC talks this week as an observer. — Reuters