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Cedi Appreciates As Inflation Drops Again
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The October 2012 inflation rate of 9.2% announced today by the Ghana Statistical Service (GSS) marks 29 consecutive months of single digit inflation rate in the country. This is in clear contrast to our critics who believe that inflation is likely to return to double-digit zone this year. Compared with the end-year inflation of 18.1% recorded in December 2008, the single digit inflation achieved in 29 consecutive months is indeed an unprecedented achievement.

Although inflation rose during the first half of 2012, it still remained in the single digit zone. The rise in inflation after initial declines in the early part of the year was driven mainly by the non-food sector, which was largely affected by the pass-through effect of the depreciation in the value of the domestic currency. The depreciation of the Cedi was however stemmed after the government took decisive policy actions to respond to the build-up of pressures in the foreign exchange market. Indeed, the cedi depreciated by 15% in the first 6 months of the year but by August it had appreciated by 3.3%. It is expected that the cedi will appreciate by 1% in the last quarter of the year. This means that the cedi will depreciate by 11% in 2012 compared to the depreciation of 26% in 2008.

The October 2012 consumer price index shows that inflation is on a downward trend even during an election year. The drop in inflation for three months running was mainly on account of the decline in food inflation, which dropped from 5.5% in July down to
Election Year Phenomenon

2008 (Election Year)

2012 (Election Year)


Average inflation: 16.46%
Year inflation: 18.13%
. Upsurge in world food prices
. Rising world crude prices reflected in domestic ex-
pump prices
. No oil price hedging in place to mitigate price

Av inflation (Sept): 9.14%
Year to Oct. inflation: 9.2%
. Oil revenue flowing into budget
. Single spine salary payments
.Oil price hedging program in place


Full Year: 26% depreciation
Jan to August: 17% depreciation
Sept to December: 9% depreciation

Full Year (est): 11% depreciation
Jan to Aug: 12% depreciation
Oct to Dec: 1% depreciation
. Review of the provision of primary reserve on FCY
deposits in GHS to stem depreciation
100% GHS cover for Vostro balances


Y/E Real Rate: 6.53%
BoG Policy Rate: 17%
Ave BoG Policy Rate: 15.79%
T/Bills 91 Days: 24.66%
3-Year Bonds
5-Year Bonds

Y/E Real Rate: 13.7%
Bog Policy Rate (Sept): 15%
Ave BoG Policy Rate (Sept): 14.56%
T/Bills 91 Days: 23.11%
3-Year Bonds 23% (Secondary market -19%)
5-Year Bonds 24% (Secondary market 19.25%)
.Real rate (Nominal interest rate less inflation) significantly higher in 2013 by about 50%

Gross International Reserves

As at 31st December 2007: USD2.8 bn
As at 31st December 2008: USD2.0 bn
Import Coverage: 1.8 months

As at 31st December 2011: USD5.2 bn
As at 31st September 2012: USD4.8 bn
Import Coverage: 2.5 months

Source: Ministry of Finance and Economic Planning

4.1% in October. Non-food inflation similarly dropped from 12.5% in August to 12.2% in October.

The superior performance of NDC governments Economic Management Team is demonstrated in the attached table which compares the trends in some of the key macroeconomic indicators in the two election years of 2008 and 2012.

Government wishes to emphasize that the countrys economic fundamentals remain very strong. Improved macroeconomic policies, underpinned by prudent fiscal management and tight monetary policy has contributed immensely to the decline in both the fiscal deficit and inflation since 2008, while the strong build-up of gross foreign reserves has generally supported the stability of the value of the domestic currency. The sharp decline in inflation also provides concrete evidence of an economy that is growing at a fast rate. With the current levels of interest rates, the crop harvest season coming on stream and the cedi appreciating, the inflation rate is expected to continue to remain in a single digit for the remaining period of the year.

Source: Peacefmonline.com/Ghana

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