Dr Ernest Addison, Governor of the Bank of Ghana (BoG), has stated that the current developments in inflation that have occurred in the economy throughout the course of 2023 indicate that the economic managers are on track.
Inflation was around 54 percent a year ago, but Dr Addison said that through strong and innovative policies, tight monetary conditions, and relative exchange rate stability, inflation will be more than halved by the end of 2023, with the Ghana Statistical Service (GSS) reporting it at 23 percent.
He said that various variables have aided the disinflationary process.
He cited “monetary policy stance throughout 2023, stable crude oil prices which led to stable fuel prices with favourable impact on transportation costs, a relatively stable exchange rate environment, stronger FX reserve accumulation due to the gold for reserve programme, and favourable climatic conditions on the food supply chain process,” as the factors.
Looking ahead to 2024, he expects inflation to fall further, supported by continuing implementation of good policies until inflation expectations are firmly anchored to our single-digit target.
“In this regard, the Bank of Ghana will continue to monitor both domestic and external developments and respond appropriately to ensure that the downward inflation trajectory observed in recent months is sustained without undermining growth. The 2023 experience of a strong reduction in inflation and stronger growth is instructive,” Dr Addison said during the joint Ghana-International Monetary Fund (IMF) press conference in Accra on Friday, January 19 on completion of the First Review of the Extended Credit Facility (ECF) Programme
Regarding the financial industry, he stated that banks are still sound, liquid, and lucrative.
However, he stated that the Bank of Ghana will continue to closely monitor banks’ capital restoration activities in accordance with authorized plans, including help from the Ghana Financial Stability Fund, after the impact of the Domestic Debt Exchange Programme (DDEP).
“We expect early recapitalization to promote banking sector resilience and effective financial intermediation to help speed up macroeconomic economic recovery going forward. With a successful conclusion of the first review, we need to begin to think of the second review of the programme and beyond. While tentative indications point to sound implementation of policies through to December 2023, vigilance and commitment will be needed in 2024 to undertake all the structural reforms envisaged under the programme. Implementation of these reforms to ensure the economy functions well will be critical.
I will finally add that although a challenging year confronts us, we remain confident about the ongoing economic recovery process and would want to stress the importance of executing the needed structural reforms to support a better functioning of the economy. These structural reforms will be in ensuring long term sustainability of performance.”