Monetary Policy
MPC Press Release - May 2005
Tuesday, 31 May 2005 00:00

The latest numbers indicate that the impact of the recent 50 percent petroleum price increase on headline consumer price Inflation has been absorbed; the underlying inflationary pressures in the economy continue to be subdued and core inflation indicators are stable and trending downwards, underpinned by strong economic fundamentals. After a jump from 11.6 percent in January 2005 to 14.0 per cent in February, and 16.7 percent in March, which interrupted the disinflation process underway, headline inflation declined marginally to 16.6 percent in April.

The inflation numbers show a slow-down in food price inflation (from a monthly increase of 4.4 percent in March to 3.3 percent in April) as well as a significant decline in non-food price inflation (from monthly increases of 6.8 percent in February and 3.9 percent in March, to 0.6 percent in April. The overall Consumer Price Index rose by 2.0 percent in April compared with 4.2 percent in March and 4.8 percent in February and the increase of 2.1 percent recorded in April 2004.

The Bank of Ghana’s measures of core inflation moved within a narrow range. Inflation adjusted for energy and volatile components in the index remain within a single digit range, with some measures tracking inflation rates of 6.6 percent, 9.0 percent and 10.4 percent in April.

Provisional data on the execution of the 2005 budget for the first quarter of 2005 indicates that government revenue growth has been robust. Total tax revenue amounted to ¢4,226 billion, a 30.0 percent increase over the same period in 2004. The increase in tax revenue was reflected in all the major revenue categories (CEPS, IRS, and VAT). Grant inflows for the first quarter amounted to ¢380.7 billion, 45.2 percent of the amount received for the first quarter of 2004 (¢842.7 billion).

Government expenditure for the first quarter of 2005, which is provisionally estimated as ¢5,246.0 billion, was about 13.5 percent above the outturn for the same period last year. Expenditure on the government wage bill was estimated at ¢1,598 billion, equivalent to 30.4 percent of total expenditure for the quarter. While foreign financed capital expenditure was low in the first quarter, domestic financed capital expenditure increased by 16.0 percent relative to the first quarter of 2004.

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