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Increase in Taxes Won’t Affect Inflation – BoG Governor

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Dr. Ernest Addison, the Governor of the Bank of Ghana (BoG), has reassured the public that concerns about increases in taxes leading to inflation are unfounded.

Speaking at a joint press briefing in Accra on Friday, January 19, where the approval of Ghana’s second tranche US$600 million loan facility by the International Monetary Fund was announced, Dr. Addison stated that the BoG will manage the inflation side of the macroeconomy to prevent the implementation of tax policies from affecting the downward trend of inflation.

The implementation of Ghana’s US$3 billion three-year Post COVID-19 Programme for Economic Growth (PC-PEG) with the IMF has resulted in the adjustment of some existing taxes and the introduction of new ones. Economic watchers have raised concerns about the potential impact of these changes on inflation and its consequences for businesses and the lives of Ghanaians.

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However, Dr. Addison argued that the increases in taxes should not necessarily lead to higher inflation. Instead, he expects that they will contribute to improving fiscal consolidation and reducing overall macro pressures. He highlighted recent factors such as the monetary policy stance, stable crude oil prices, a relatively stable exchange rate environment, and stronger foreign exchange reserve accumulation as supporting Ghana’s disinflation process.

Dr. Addison pledged that the government would continue implementing sound policies to further reduce inflation in 2024 until a single-digit inflation rate is achieved. The BoG will monitor both domestic and external developments to ensure the sustained downward trajectory of inflation without compromising economic growth.

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Stephane Roudet, IMF Mission Chief for Ghana, commended the country for the progress made under the program, noting that reforms are yielding positive results. However, he emphasized that the current 23.2% inflation rate for Ghana is still high and called for a tight monetary policy to bring down both inflation and interest rates.

Roudet acknowledged the positive disinflationary path but stressed the importance of the Central Bank maintaining a sufficiently tight monetary stance until further improvements are observed.

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