2003 Budget In Disarray?

A letter from Ghana’s government to the International Monetary Fund (IMF) (READ) indicates that the 2003 budget targets have been thrown out of course. According to the letter, the real effect of the sharp increase in the prices of petroleum products is now “making its mark” on the Ghanaian economy.

It said inflation has been on a “steady rise” since last February. It added that in the light of the economic distortions created “our target for the 12-month inflation rate has been raised. Instead of bringing inflation down to single digits by the end of 2003, we aim, at keeping it, at best at 22 percent, by December 2003”.

“Consistent with what we promised to be our disinflationary strategy, steps have been taken to tighten the monetary conditions (it has been instituted at the Bank of Ghana), which ultimately will increase its prime lending rate to over 27 percent. There will continue to be recourse to the net domestic financing of the budget for this year, as a whole”.

The letter added “The Government of Ghana considers that the revisions to the 2003 programme strike a balance between maintaining downward pressure on inflation and protecting Ghana’s poverty reduction and growth objectives”.

Analysts who reviewed the letter say the government is finding itself between the ‘devil and deep blue sea’.