Accra, June 7, GNA - Central Bank Governor, Dr Paul Acquah, has asked Ghanaians to see the current energy crisis facing the country as 'having a silver lining' that highlighted the need to focus on a long term energy policy to underpin the drive for a middle income status. He said it should also serve as clarion call for businesses to adapt their operations to make them energy efficient in the medium term. The Governor was addressing a monthly luncheon of members of the Association of Ghana Industries (AGI) on the topic macro-economic stability in the face of the energy crisis.
Dr Acquah said the high pace of economic expansion in the past six years had come with an increased demand for energy, which was estimated to be growing around 7 percent annually.
He said since industry thrived on energy, rationing of supply below demand could affect overall industrial output but was hopeful that these losses could be mitigated through drawing on contingency or stand-by sources of supply to bolster output and increase profits. According to him, the assessment of developments over the first five months of the year indicates that prevailing macroeconomic outlook remain favourable even in the midst of the load shedding program. However, Dr Acquah, warned of likely drop in the GDP growth rate for the year 2007 below the targeted 6.5 per cent because of the impact of the energy crisis on the mining and manufacturing sectors, which were the largest users of electricity and the most energy intensive in terms of their contribution to GDP.
"But on the aggregate, given the momentum of the on-going economic expansion, the risk is on the upside, and restraining GDP growth to below the forecast of 6.5 percent for the year; preventing possibly higher growth rate."
On the outlook for inflation, Dr Acquah said price increases irrespective of the source posed some risks but insisted that the right policy was to ensure that cost-price increases associated with possible adjustments in fuel and electricity prices did not become embedded in inflationary expectations.
It is in this direction that the Bank of Ghana has fine-tuned its policy framework by formally adopting an inflation targeting framework to pursue price stability and serve as basis for accelerated growth. On the redenomination of the cedi, Dr Acquah said the current currency regime in Ghana was not adequately supportive of business transactions.
High transaction costs at the cashiers, general inconvenience and high risks involved in carrying loads of currency for transaction purposes, increasing difficulties in maintaining bookkeeping and statistical records and ensuring compatibility with data processing software and the strain on the payments system, particularly the ATMs are but a few of the many sources of inefficiency that characterize the current note regime.
He said the re-denomination exercise was therefore aimed at removing the deadweight burden or costs on the economy and improving the role of the cedi as a means of exchange, as an integral part of reforming the payments system in country.
Payments systems are considered an essential part of the financial infrastructure of a modern market economy.
Dr Acquah said the re-denomination did not alter the external value of the currency. "Domestic prices do not change as only the currency numeraire (in our case equating A210,000 to GH=A21) changes, and this applies across board." He said the Bank of Ghana was adopting an intensive public education to ensure that the exercise succeeded. 07 June 07