Nduom say single digit inflation can be achieve in four years

It is possible to reduce inflation to a single digit at the end of four years if the government stays within its budget and does not fall into the snare of election spending, Dr Kwesi Nduom, Minister of Economic Planning and Regional Co-operation said on Thursday.

"If we are consistent with our present fiscal and monetary policies and the government does the right things, it is possible for us to hit a single digit inflation by the close of the term of this government."

Dr Nduom was reacting to concerns of newly appointed envoys on the effect of high interest and exchange rates and high inflation on the willingness and profitability in investing in the country.

Ghana and her West African partners are expected to hit single digit inflation by 2003 as part of the convergence criteria for a single currency. But analysts are divided over this possibility.

He said, " the government is aggressively looking at bringing down inflation. But this will take time, a lot of effort and very difficult choices."

The Minister said inflation has been a major problem in the last 15 years, and it is going to take some while before things change significantly.

He said the current stability of the Cedi is no fluke but due to prudent steps taken by government.

Dr Nduom said Ghana is benefiting significantly from not paying her debts, some of which were due as far back as March.

"That is why I do not understand people who claim we are not benefiting from the Highly Indebted Poor Countries (HIPC) initiative yet.

''The fact is that we are currently holding a lot more foreign cash than before. In some instances, there is shortage of cedis."

Dr Nduom said government revenue has been building up in the last 15 years "but the problem is that expenditure also went up triggering inflationary pressures."

He said government is working at changing the practice where the central bank fixes interest rates, saying, "in other economies, it is left to the treasury, which in our case, is the ministry of finance or its appointed authority."

Dr Nduom questioned the lack of corresponding drop in interest rates each time inflation drops or when there is improvement in the economy.

"It is not the job of the central bank to set rates. The determination of rates should not be left to the Bank of Ghana alone. If the economy improves, the indicators must reflect it."

He said the government is also building up reserves but noted that it would not be able to meet the West African Monetary Institute's target of 2003.

"The reserve situation now is bad. Our target is to get to the three months reserves. This will start improving by the end of the year and will keep rising," he added.

On the new focus of national development, Dr Nduom said the government is vigorously looking at debt and fiscal management, increased agricultural production and bringing in long-term capital into the economy.

He also mentioned the financial and technology industry as areas with great potential to advance the economy.

"If these are done then the poverty reduction strategy being developed would have a sound foundation and will succeed."