The stability of the Ghanaian economy in 2012 will be under threat as the central bank cites three main factors of upside risks to the prevailing macro-economic stability of the country.

In assessing the outlook for inflation, the Bank of Ghana (BoG) says in its latest Monetary Policy Committee (MPC) report that it has identified the “possible contagion from the eurozone debt crisis,  fiscal pressures and the unusual upward volatility in the foreign exchange market observed last month.”

On the eurozone debt crisis, the report said the Committee was of the view that the potential impact of the crisis on the domestic economy could be transmitted through four possible channels – “Reduction in trade finance to domestic banks, diminished portfolio inflows, worsening terms of trade due to reduced global demand for primary   commodities, and reduction in remittances and donor flows.”

While government’s fiscal targets were met in 2011, the BoG indicates that potential sources of pressures exist in the outlook for the year 2012.

Specifically, the report said “the pace of executing the budget in terms of arrears clearance, including those relating to the migration to the Single Spine Salary Structure (SSSS), and the recently announced increase in the minimum wage may impose additional demand pressures.”

Figures from government show that over 80% of public workers has been migrated unto the SSSS with the wage bill now GH¢5 billion.

For the unpredictability of the foreign exchange, the central bank said it has observed that there was a rapid growth in imports in 2011.

It added that the “unusual surge in demand for foreign exchange during the last quarter of the year created a misalignment  in Bank of Ghana’s foreign exchange cash flow.”

The report continues that there was further pressure on the exchange rate when “foreign investors sought early redemption of their investments on the domestic bond market” adding “the situation  was further aggravated in January 2012 by speculative activities of dealers and traders.”

After intervening in the market, the BoG said calm has been restored but going forward, it said “the situation will be monitored closely and the Bank is ready to take appropriate measures to stem potential threats to achieving the inflation target.”

By Ekow Quandzie/

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