Ghana inflation seen at 10 percent by year-end

Ghana's target of bringing inflation down to 10 percent by the end of the year is achievable, deputy central bank governor Million Narh said on Monday, signalling more interest rate cuts. "Our target is for 10 percent by year-end. It is achievable," Narh told Reuters on the sidelines of an economic conference in the Malawi capital, Lilongwe.
The West African nation is a net fuel-importer, making its economy highly susceptible to shifts in world oil prices, although if crude stayed around $85 a barrel - it is now just below $80 - there were no worries, he said.
"Going forwards we expect to ease monetary policy in order to speed up the development process," he said. Ghana has been under pressure to bring inflation down from 20 percent in 2009, but cut its prime interest rate by a surprise 200 basis points to 16.0 percent in February.
In the same month, annual inflation fell for its eight consecutive month to 14.23 percent, its lowest level in almost two years. Ghana is due to start pumping oil in the final months of this year, generating an average $800 million in revenues for state coffers from next year, according Finance Ministry projections seen as relatively modest.
Narh said the Bank of Ghana was being "a bit cautious" in assessing the impact of the oil windfall, but said policies in the pipeline, such as an oil reserve fund, should off-set the risk of "Dutch disease" - often typified as currency appreciation and galloping inflation. "We are putting forth mechanisms to avoid what we call the Dutch disease by managing our policies in such a way that we'll be able to maintain our exchange rate at a reasonable level to encourage exports," he said.
Even at its peak, the oil revenues will only be a fraction of government spending, which this year is due to rise by 40 percent to 12.1 billion cedis ($8.6 billion) and push the deficit to 7.5 percent of national output. The Finance Ministry has calculated that if hydrocarbon revenues from the off-shore Jubilee field were distributed evenly, every citizen would receive $20 next year, rising to $75 in 2017.
Buoyed by oil and cocoa - it is the world's biggest producer after Ivory Coast - the economy is forecast to grow as much as 15 percent next year. The International Monetary Fund believes that if spent wisely, oil revenues could help Ghana join middle-income countries such as Cameroon within 10 years, requiring a doubling of its per capita annual income to $1,000.