The International Monetary Fund’s (IMF) Resident Representative in Ghana, Mr. Wayne Mitchell, has warned that government’s fight to tame inflation is far from over. Many countries, including Ghana, are not far from the tipping point where inflation can easily accelerate to levels that will heighten macroeconomic uncertainty and dampen investment. He said in an article he wrote to the Business and Financial Times that: “While there is a chance of a strengthened supply response in these countries -- particularly scope for productivity improvements -- the possible costs of overheating could be serious, eventually requiring much stronger policy responses and potentially reversing many of the gains achieved in recent years. “Against this backdrop, these countries -- including Ghana -- should focus squarely on medium-term rather than near-term growth considerations in setting fiscal policy, while tightening monetary policy wherever non-food inflation has climbed above the single digits or the balance of payments situation is weakened,” he said He suggested that the medium-term considerations should include: improving absorption; project execution and management capacities, particularly of state-owned enterprises; and the availability of projects with sufficiently high rates of return. “Also, considerations include integrating investment planning, financing and debt sustainability considerations. In particular, it will be important to ensure that these factors are considered collectively when the appropriate fiscal stance is determined.” Ghana’s consumer inflation is seen breaching the Central Bank’s target in the second quarter, and possibly bucking the single-digit trend that has prevailed for the last 23 months. In April, the annual consumer price index (CPI) grew at 9.1%, the fastest in 12 months, showing signs of the weak cedi pumping up price pressures. In March, the CPI grew at 8.8%. The Bank of Ghana is targetting a rate of 8.5% at the end of 2012 and an annual average rate of 8.7%. The cedi has weakened on average by 10.3% against the US dollar among banks since the start of the year, while it has lost an average of 15% of its value in the forex bureau market. Inflation dropped to single digits in June 2010, where it has remained ever since and has been a pillar of macroeconomic stability for close to two years. But a rise in demand for imports, a reduction in net capital inflows, and the activities of speculators have caused the cedi to fall rapidly -- putting pressure on inflation and imperiling growth. Real GDP expanded by 14.4% in 2011, the Ghana Statistical Service said last month, and is projected to grow at 9.4% in 2012 with industry -- especially petroleum production -- and services leading the expansion. The Bank of Ghana has twice raised its monetary policy rate this year by 100 basis points to attract investors to cedi assets and stabilise the exchange rate. Its last hike in April took the rate to 14.5%. It has also implemented other measures to support the cedi, including instructing banks to maintain the 9% mandatory reserves for both local and foreign currency deposits in cedis only, in addition to raising Treasury yields and introducing 30-, 60- and 270-day bills to mop up excess liquidity. The interest rate on the 91-day bill has risen to 15.6% this month from 10.3% at the end of December 2011. The interest on the 182-day bill has also gone up to 15.9% from 11.1% in the same period.