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Ghana: Govt to Understudy Emerging Economies
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Ghanaian Chronicle (Accra)
26 March 2008
Posted to the web 26 March 2008
Stephen Odoi-Larbi
As emerging markets continue to perform well in the global economy, their economic policies have become a module for many developing countries to emulate.
For the past decades, developing countries have battled with control of inflation in their local economies, a situation which have become a source of worry to the International Monetary Fund (IMF) and the World Bank (WB).
IMF's critical stand in helping developing countries to control inflation on their economies came to light when it recently hosted "Ghana to learn from economies that have been able to bring inflation under control and are doing well in the global market".
In May 2007, Ghana became the second country after South Africa in Sub-Saharah Africa to have formally adopted inflation-targeting framework for its monetary policy. It announced price stability as the central bank's primary objective.
The central bank (Bank of Ghana) desirous to achieve its single digit inflation mark it announced sometime ago, recently sent a four-member delegation to Washington, headquarters of the IMF, to understudy emerging economies on inflation targeting.
Among the countries understudied include Brazil, Chile, Turkey and South Africa.
Leader of the delegation Mr. Maxwell Opoku-Afari, Advisor to the Governor of Bank of Ghana, highlighted on the importance of understudying emerging economies having had bilateral assistance from other central banks in the world.
"We've had bilateral assistance on inflation targeting from the Bank of England and others, but we thought it was time to see how other countries have been doing it", he said.
Ghana was previously grappling with high inflation, large fiscal and external account deficits, high external and domestic debt but with the introduction of a new monetary and fiscal policy framework by the authorities, the country has witnessed a new turning point in its economy.
In a release issued in Washington by the IMF over the weekend, Mr. Opoku-Afari disclosed that the country's new macroeconomic framework was a reduction in domestic debt which the central bank would continue to pursue.
"As domestic debt decreased from about 31percent of gross domestic product (GDP) in 2001 to 13.5percent in 2006, we also saw inflation come down from about 62percent in 2001 to around 12.7percent today", he noted.
He disclosed that his team's week-long visit yielded valuable results which according to him, would help put the economy on better track towards achieving a middle income status by 2015.
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"One lesson that has come out strongly for most of the countries is the role of fiscal policy in trying to break the single-digit (inflation) barrier", he said.
According to him, Brazil and Chile represent particular important case studies in inflation targeting, a situation similar to the one the country has announced it would introduce.
With the county's discovery of oil last year, Mr. Opoku-Afari noted that it would be prudent if the country took a lesson from Nigeria's experience.
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