The World Bank is willing to assist Ghana to cope with a new economic situation which has eroded the foreign currency reserves and sent inflation up against a downward inflationary trend recorded in most African countries, the bank’s Chief Economist for Africa, Francisco Ferreira, said Monday.
He said the rise in the public wages in Ghana and the high inflation in the West African nation required urgent specific attention which the Bank was willing to help the country’s Central Bank to deal with.
“Inflation is falling in Africa but not in Ghana. The rise in public wages is a less comfortable situation. There is not an enormous amount of reserves. It requires attention and there is no need to sugarcoat,” Ferreira told journalists at a news conference conducted through a video link.
Ghana implemented a new public wage bill policy, which has contributed to a 47% hike in the public wage bill since 2012. The wage bill has piled pressure on the public debt and shocked the reserves which have dropped to just 2.8 months of import cover.
Last week, Ghana’s Central Bank Governor Henry Kofi Wampah revised the annual inflation target to 12%, a few percentage points higher than the 9.5% initial target set for 2015.
“We are ready to help and we hope the Governor is listening,” Ferreira said.
The World Bank released a new report, Africa’s Pulse, which estimates African economies would grow by a combined rate of 5.2% in 2014, boosted by high household spending and strong investments.
Cash inflows into Africa, mostly for capital investments, continued to rise, reaching an estimated 5.3% of Africa’s Gross Domestic Product (GDP) in 2013. This was above the average for middle-income economies around the world, which received an average of 3.9%.
During the same period, Africa’s net foreign direct inflows grew by 16%, boosted by oil and gas discoveries in Angola, Mozambique and Tanzania.
Most economies benefited from lower international fuel and food prices. This sent inflation slowing to 6.3% in 2013 compared to 10.7% in 2012.
However, Ghana and Malawi broke with the trend to record high inflation. The Bank said the inflation was caused by depreciating currencies in the two countries.
To deal with the inflation, the Ghanaian Central Bank has been considering raising the Bank rates to 17% to stabilize the local currency, the cedi, which has shed nearly 22% to other currencies.