GRi BEF News Ghana 02 - 02 - 2001
CEPA urges government to exercise fiscal
restraint
CEPA urges government to exercise fiscal
restraint
Accra (Greater Accra) 02 February 2001
The Centre for Policy Analysis (CEPA) on Thursday asked government to exercise fiscal restraint if any appreciable impact is to be made in reducing inflation and slowing down the rate of depreciation of the cedi.
It said failure to bring down the rate of inflation quickly could result in the economy moving into a hyper-inflationary situation.
"Economic stabilisation is necessary but not sufficient to ensure that the economy is set on the right footing for an expansion in long-term growth and improvement in the well-being of the ordinary Ghanaian," Dr Charles Jebuni, a CEPA research fellow, told journalists in Accra.
Pesenting highlights of the findings by CEPA in its mid-year review of the country's economy for 2000, Dr Jebuni said in pursuing the problem of stabilising the economy, the new administration should not lose sight of these objectives.
The economic stabilisation programme needs to be designed within the context of a medium-term programme that is aimed at achieving set objectives, he said adding that "with a per capita income of about 400 dollars, poverty is endemic in the country."
Dr Jebuni said the economy has been in a state of crisis since the third quarter of 1999 and continued into the first half of last year adding that the macroeconomic fundamentals are still weak.
"Inflation accelerated and interest rates were unbearably high. Large fiscal imbalances persisted, the current account-induced balance of payment difficulties of 1999 intensified in 2000 and the foreign exchange market was badly distorted," Dr Jebuni added.
Official data had non-food inflation on a year-on-year basis, running at 32.6 per cent at the end of June 2000 and this is currently hovering around 40 per cent.
He said the fiscal situation must be improved and suggested the need for early recovery of divestiture receipts that are in arrears to impact positively on fiscal balances.
Dr Jebuni said by all accounts oil prices are likely to remain high and certainly unlikely to revert to the lows that prevailed in 1998. "This is putting tremendous pressure on the financial system because of the rising debt of the Tema Oil Refinery."
The challenge for the new administration in the short-run is how to deal with the severe stabilisation problems facing the economy.
He said the unfavourable external developments only served to worsen an unsatisfactory underlying situation accentuated by delays in the disbursement of external aid and implementation lapses in the divestiture programme.
"Ghana was the victim of its own contrived compliance with conditionalities and attempts by the IMF to maintain its own institutional credibility in the face of a badly designed programme and poor monitoring."
To solve the problem, he said, Ghana needs an emergency financing package and appropriate measures to enable the economy to adjust to what is known to be a non-transient external shock.
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Accra (Greater Accra) 02 February 2001
The following are the average inter bank exchange rates of the cedi equivalent to the dollar, and derived rates for other major foreign currencies, as announced on Thursday February 1, 2001, by the Ghana Association of Bankers:
Currency Buying Selling
US Dollar 6,798.82 7,015.91
Pound Sterling 9,982.03 10,302.16
French Franc 974.46 1,004.83
Swiss Franc 4,168.73 4,298.30
Deutsche Mark 3,267.33 3,371.02
Canadian Dollar 4,535.22 4,676.00
Japanese Yen 58.49 60.32
Dutch Guilder 900.57 2,990.90
S/African Rand 876.50 903.14
Euro 393.41 6,590.43
CFA Franc 9.74 10.05
Naira 63.05 65.06
Ecowas/WAUA 8,907.62 --------
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