The Bank of Ghana’s gross international reserves declined to GH¢4.6 billion in January 2012 after peaking at US$5.4 billion in December 2011. This was as a result of increased demand for foreign exchange resulting from the higher than normal surge in seasonal demand to support trade, the bank has explained. Paa Kwesi Amissah Arthur, Governor of the Bank of Ghana (BoG), at the recent Monetary Policy Committee (MPC) briefing in Accra, stated that the reserves hit U$4.7 billion in 2010. Total inward transfers received by individuals through the banking system, he noted, grew by 72.7 per cent to US$1.9 billion in 2011 from US$1.1 billion in 2010. Also, he said average base rates of banks went down from 25.8 per cent to 22.5 per cent in 2011 with quotations within the range of 16.8 – 25.9 per cent. Average lending rates also declined from 27.6 per cent to 25.9 per cent in 2011, with annual percentage rates for enterprises ranging between 17.4 – 30.8 per cent. Given the foregoing and how it will impact on inflation, he said, the bank has identified three main sources of upside risks to prevailing macro-economic stability. “These include a possible contagion from the Eurozone debt crisis, fiscal pressures and the unusual upward volatility in the foreign exchange market observed last month. “With respect to developments in the Eurozone, the Committee was of the view that the potential impact of the crisis on the domestic economy could be transmitted through some four possible channels. It said this could be done through ensuring a reduction in trade finance to domestic banks, diminished portfolio inflows, worsening terms of trade due to reduced global demand for primary commodities and reduction in remittances and donor flows.” Mr Amissah-Arthur revealed that government’s fiscal targets were met in 2011 though potential sources of pressures exist in the outlook for this year. “Specifically, the pace of executing the budget in terms of arrears clearance, including those relating to the migration to the Single Spine Salary Structure (SSSS), and the recently announced increase in the minimum wage may impose additional demand pressures. The MPC concluded that the balance of risks to inflation is elevated.