Ministry of Finance to beat inflation target?

The Ministry of Finance may be indicating that it will reduce its end of year inflation target from 9.2% to at least 7%.

In the budget statement for 2010, the Minister of Finance, Dr. Kwabena Duffour, projected an end of period inflation target of 9.2%, however with inflation pressures reducing, the Ministry of Finance seems to be lowering its inflation target for end 2010.

In a press release issued last week, the Ministry of Finance argued that government expenditure has increased in the face of the declining inflation. “Since June 2009, however, the inflation rate has been on a steady decline, reaching 16% in December 2009. By June this year, the inflation rate had dropped to 9.5% and we expect the rate to reach, at least, 7% by December this year.”

The release added that total government expenditure in 2009 was 11% higher that in 2008.

There is ongoing public debate regarding the cost of declining inflation. Some experts have cited rising unemployment and low government spending as some of the consequences of reduced inflation. A situation which has contributed to the reduced access to credit by SMEs from commercial banks and commercial banks’ reluctance to reduce lending rates.

By Dode Seidu

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