Ghana’s economy may overheat on utility tariffs, wage increment as public debt hits GH¢21.6b – BoG
Emerging forms of adjustment in utility tariffs, wage pressures and other oil-induced and external pressures are likely to affect the smooth running of the economy, according to the Bank of Ghana, even though, the International Monetary Fund (IMF) has predicted that the growth of Ghana’s economy is expected to exceed 13% by the end of 2011.
However, governor of the central bank, Mr Kwesi Amissah-Arthur says upward adjustments in utility tariffs, wage pressures and other oil-induced and external pressures are “upside risks to inflation” and may result in the overheating of the economy despite the country’s improved macroeconomic fundamentals.
According to him the deceleration in headline inflation was largely attributed to continued reduction in food inflation, which reached 3.3% in July, down from 4.5% recorded in December 2010. “Non-food inflation, on the other hand, has gone up slightly from the 11.2% recorded at the end of December 2010 to 11.8% by the end of July.” Ghana’s inflation as of July 2011 is 8.4%.
“Despite the improved macroeconomic fundamentals, upside risks to inflation are emerging in the form of the adjustment in utility tariffs, wage pressures and other oil-induced and external pressures that may result in the overheating of the economy,” Amissah-Arthur told the media after releasing its Monetary Policy Committee (MPC) statement in Accra September 1, 2011.
The government announced a 20 per cent increase in public sector wages taking effect from January 2011 and the Public Utilities and Regulatory Commission (PURC) also made upward adjustments in electricity and water tariffs by 7% and 6.7% respectively with effect from September 1, 2011.
On debt, the Bank said the country’s total “public debt at the end of July 2011 was therefore GH¢21.6 billion, equivalent to 40.5% of GDP, up from 38.1% at the end of December 2010.”
The stock of domestic debt at the end of July 2011 was GH¢10.9 billion, up from GH¢8.3 billion in December 2010 while the external debt stock increased from $6.3 billion at the end of December 2010 to $7.1 billion at end of July 2011, it noted.
By Ekow Quandzie
This is the reserve Ghana should be having yet the government is using to pay public sector which often many are ghost names. Ghana should start building reserves instead overspending the sooner the better because it bit the economy.