Accra, Jan 24, GNA - The Monetary Policy Committee has called for the stiffening of fiscal policy to maintain the current macro-economic stability, reduce quasi-fiscal deficits and channel resources for investment and foster growth.

Dr. Paul Acquah, Chairman of the MPC told Journalists in Accra on Monday that the continued outlook for a stable inflation, increased Gross Domestic Product and strong external payments position would depend on the stance of the government budget for 2005.

He said private sector response to the improved economic fundamentals and moderation in price setting as well as balance in wage settlements against productivity in view of the alignment of domestic petroleum prices under deregulation were some of the essential factors that would determine the direction of the economy in the year. Giving an overview of the performance last year, Dr Acquah said the economy closed the last quarter with inflation further easing downwards to the policy single-digit target. Headline inflation eased from 12.6 in September to 11.8 per cent at the end of December, mostly because of improved food supply and stable exchange rate.

He said the cedi maintain a relative stability, with the cedi depreciating against the US dollar, the British Pound and Euro on the interbank market was 2.2, 13.3 and 12.3 respectively. This was achieved despite the sharp swings in major currency values on the international exchange markets, which saw the Euro and pound significantly appreciating against the US dollar in the last quarter of 2004.

Gross International Reserves now stands at 1,732 million dollars as at December 2004, representing some 4.1 months of imports. Dr Acquah said although government expenditure, which stood at 25.2 trillion cedis was above the target of 22.5 billion, the large increase was matched by robust revenue growth and grants.

Government revenues and grants totalled 23,751 billion against a target of 21,537 cedis. Tax revenue grew from 15,271 billion to 17,400 billion cedis with both direct and indirect taxes exceeding estimates. Grants for last year stood at 4,756 billion cedis compared to 3,350 billion cedis under the Multi-Donor Budget Support Mechanism. On the banking system, the Governor said the banks had remained well capitalized, profitable, fairly liquid and stable.

He said the growth rate of provision for bad and doubtful loans in bank portfolios had been on the decline with an improvement in credit quality.

The industry-wide ratio of non-performing loans was at 16.4 per cent in September last year, down from 18.5 per cent.