Don’t worry, inflation will peak soon, BoG says

Dr Maxwell Opoku-Afari, First Deputy Governor of the Bank of Ghana

Bank of Ghana First Deputy Governor Dr Maxwell Opoku-Afari tried to allay fears over soaring inflation, saying the bank’s forecasts raise hopes it will peak soon and will begin to decline – although there are still upside risks.

Speaking on behalf of the Deputy Governor at a media training workshop for the North Zone in Tamale, Director of Research Dr Phillip Abradu-Otoo highlighted factors such as oil prices at the pump and the depreciation of the cedi against major trading currencies. drivers of the current high inflation.

Although inflation hit 31.7 percent last month, the deputy governor expressed optimism that the rate of price increases will soon peak and begin to decline.

“Headline inflation moved well above the upper range of the medium-term objective, mainly due to food prices, transport costs, upward adjustments in non-pump oil prices and the pass-through of exchange rate depreciation… Inflation was 9% in just one year July 2021.

“The Bank’s forecast indicates that inflation will peak later this year and begin to return towards the medium-term horizon. There are, however, significant upside risks to the inflation outlook, including rising commodity prices, especially crude oil; increased supply chain disruptions; and the more than 20% increase in utility rates which is expected to take effect on September 1, 2022. These are all sources of noise for the economy and the conduct of monetary policy,” he said. .

To tame runaway inflation, the Bank of Ghana recently raised its policy rate by 300 basis points, citing risks to the inflation outlook as the main reason for the Monetary Policy Committee’s decision.

On income

Commenting on the Bank’s GH¢22 billion overdraft granted to the government – which became a controversial issue after minority members of parliament raised the alarm that it was fresh printed money – the Dr Opoku-Afari, while denying the allegations, said his central bank support became necessary due to the lack of access to the international capital market, which left a huge void in the 2022 budget.

“As we all know, significant challenges remain in the execution of the 2022 budget, as revenue mobilization has not kept pace with projections, creating financing challenges. In the absence of market access international capital markets and given domestic financing constraints, the central bank overdraft helped close the financing gap, as evidenced by the mid-year fiscal review.

“Fiscal challenges have also heightened concerns about debt sustainability. Ongoing policy discussions with the IMF are expected to help address underlying macroeconomic challenges, restore fiscal and debt sustainability, and re-anchor a sustainable balance of payments,” he said. he declares.

Carol N. Valencia