Finance Minister, Dr Kwabena Duffuor, says the government is building adequate buffer to protect the economy against any shocks that might potentially destabilise the progress made at the macroeconomic level.
He said one of the key policies was the move to hedge the purchase of crude oil to ensure that the prices of the products remained stable for a long period in the country.
Responding to the year-on-year inflation for June 2010 which stood at 9.52 per cent, the lowest in the last three years, Dr Duffuor said when the prices of petroleum products rose frequently, there was a tendency for it to negatively impact on inflation, hence the general performance on the economy.
On the issue of not spending, the minister said the government had spent more than it did last year.
Some financial analysts and economists had argued that because of the lack of spending on the part of the government there was always the possibility of holding inflation at bay.
According to them once the government began to spend in various sectors of the economy, the inflation figures would change.
Dr Duffour however, did not mention the amount of money injected into the economy but noted that what was being expended in the various sectors of the economy was significant enough to affect the inflation figures if the necessary measures had not been taken to forestall any such phenomenon.
He said the economy had been well planned and structured to ensure that the macroeconomic conditions were not distorted and described the latest single digit inflation rate announced, as a very refreshing news”.
“The stabilisation programme is on course and all targets set are within reach in just about 18 months of the Mills administration”, he said.
To him, the success of the counter inflation had been exceptional policies that had surpassed expectation.
“This is a major achievement that brings widespread economic benefits because inflation distorts resource allocation in the economy, hurts the poorest members of the society, creates uncertainty and arbitrarily redistributes income and wealth”, Dr Duffuor added.
He said high inflation also undermined macroeconomic stability and made sustained rapid growth impossible to achieve.
“As a result of this, getting to an inflation rate of 9.52 per cent is an impressive turn around in such a short time”, Dr Duffuor added.
The minister said the chronic fiscal imbalances of 2008 resulted in persistent inflation over the last two years bringing the fiscal situation under control had been essential to the success of the counter inflationary policy and the macroeconomic stability that the country was presently enjoying.
“The government is therefore committed to implementing policies that would ensure a lowering of domestic interest rate and a reduction in exchange rate volatility so as to enhance business confidence”, he added.
Dr Duffuor said the government’s objectives of gradually moving to an overall fiscal balance would also help to strengthen the macroeconomic policy framework and free resources for essential infrastructure and other programmes.
“It is, therefore, important that we focus on the target we have set for ourselves in the 2010 ‘Growth and Stability Budget”, he added.
Another area of concern that many analysts had argued on, relate to the impact of increases in the utility tariffs and the pay cheques of public sector workers on the sustainability of the inflation figures.
But in announcing the year-on-year inflation figures for the month of June at a news conference, Dr Grace Bediako,
Government Statistician disabused the minds of the skeptics saying “the weight of utility tariffs in the entire computation of the inflation rate is virtually insignificant because it carries a weight of less than two percentage points”.
“This, will, therefore, not have any impact on inflation figures and it is not likely to affect future rates”, she added.
She also indicated that the single spine salary structure which was expected to see a rise in the pay cheques of some public workers would not bring about increased inflation, at least not in the short term.
She argued that those to benefit were not many and their purchasing power could not change the trend.
The country's economy achieved its lowest inflation figure in three years having recorded a figure of 9.52 per cent for the month of June, 2010.
The period inflation dropped closer to that figure was in December 2007 when the figure which was the lowest then was 12.75 per cent.
The latest release represents a drop of 1.16 percentage points from the previous months figure of 10.68 per cent and also follows a consistent pattern where the figure has been dropping over the last 12 months.....Read More...>>
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