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IMF urges Ghana to fight inflation with tigh monetary policy.

 The International Monetary Fund warned Ghana of the risk of inflation on Friday, urging its central bank to be ready to tighten monetary policy if needed.

"Ghana faces inflation risks from rising global commodity prices, robust domestic growth, and rapid liquidity expansion," the Fund said in a statement approving the latest disbursement in a three-year $613 million programme.

"The Bank of Ghana should stand ready to tighten monetary conditions, as needed."

The Bank of Ghana surprised most analysts by cutting the prime rate by 50 basis points to 13 percent on May 13, citing a stable outlook for prices after annual inflation dipped to 9.02 percent in April from 9.13 percent in March.

Oil from Ghana's first offshore field, Jubilee, which began commercial production in December, is seen propelling growth around 13 percent this year compared to 7.7 percent for 2010.

But public finances have slipped, with the government this month revising upwards its 2010 deficit figure to 6.8 percent of gross domestic product from 3.7 percent previously.

It has acknowledged that a 2011 target of 7.5 percent -- which already needs revising because it pre-dates a re-basing of the economy late last year that added over 60 percent to the measure of GDP -- will also need to be reviewed.

"The budget target for this year is ambitious and will require that a portion of Ghana's initial oil production revenues be saved," it noted, urging further effort to reform the tax collection system.

Ghana's 2011 budget said it would earn around $400 million from oil revenues this year, although that figure is likely to be higher if oil prices remain high.

Jubilee operator Tullow said this month it was pumping over 70,000 barrels a day from the Jubilee field, with production due to hit 120,000 bpd by July.
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Publication:International Business Times - US ed.
Geographic Code:6GHAN
Date:May 27, 2011
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