President John Evans Atta Mills and the hard-working Finance and Economic Planning Minister, Dr Kwabena Duffuor, must be rejoicing wherever they are, as their prudent fiscal and monetary stewardship has begun yielding results, with inflation now dropping to a record 19.65 percent, the lowest in eight months, and the Cedi appreciating against the Dollar, the nation’s major trading currency.
According to the Ghana Statistical Service (GSS) newsletter on the Consumer Price Index (CPI) released last week (September 11, 2009), the drop in the inflation rate represents a decrease of 0.85 percentage points from the inflation rate (20.5%) for July, 2009.
The slide in the August, 2009 inflation figure marks a clear departure from the ruinous inflationary pressure which began building up last year as a result of the fiscal excesses and monetary expansion of the erstwhile New Patriotic Party (NPP) government.
The Cedi, the local currently, has also shown remarkable strength against the Dollar, appreciating on monthly basis by 1.84% at the interbank market and 0.57% at the forex bureaux.
This means, the monthly average of the buying and selling rates both the inter-bank and the forex bureaux is almost GH¢1.46 and GH¢1.47, respectively.
The Mills administration had, upon assumption of power in January this year, inherited a run-away inflation rate of 19.86%. This was one of the bye-products of the fiscal deterioration of 2008 under the NPP regime. This deterioration was characterized by excessive expenditures by the Kufuor-led administration.
The Ministry of Finance and Economic Planning and the Central Bank have been tasked by President Mills to put in place prudent measures to trim inflation to a more manageable size and restore order to public finances which were hitherto troubled by mismanagement and lack of prudence.
Pressure of the over-spending in 2008 by the NPP government has resulted in high inflation rates in the first half of this year. In 2009, only January and August recorded rates below 20%, the GSS newsletter confirmed.
The highest rate of 20.7% was recorded in June and the lowest in August (19.65%) this year. According to the GSS newsletter, the CPI had been primarily driven by the non-food sub-sector, which constitutes 55.09% of the basket. In August 2009, inflation for the non-food group was 23.91%, as against 14.75% for the food group.
The corresponding figures for July 2009 were 24.48 and 15.17% for non-food and food respectively. With the beginning of this favourable fiscal climate, Government expects a sharp drop in inflation rate in the coming months. The Mills administration is eying a drop to about 14.5% of inflation rate by the end of the year.
The GSS itself confirmed that the remaining months of the year will see a significant reduction in the rate of inflation, saying lower rates of inflation are normally recorded in August, September and October.
The Mills administration seems to have also put a lid on the perennial monthly depreciation of the local currency, the Cedi, which again was the result of the deterioration in the 2007 and 2008 under the NPP government.
With these achievements, the core problem of the national economy, which was disguised by the Kufuor administration, is beginning to be resolved.
Confidence and appetite of both investors and consumers are beginning to build up in response to these significant macro-economic achievements chalked by the Mills/Mahama administration just eight months upon assumption of office.
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