pressures. indeed, in the aftermath of the pandemic, the three alternative measures shown on this slide ( persistent and common component of inflation, trimmediii and finecoreiv ) have turned up earlier than the standard core index. and both in 2008 and in 2011 - 2012, they have also signalled earlier the easing of inflationary pressures. second, future inflation. we will obviously use our models and forecasts, but we should also give a strong attention to inflation expectations by financial markets and still more by economic agents : entrepreneurs and households are the real price - and wage - setters. here so far, 3 to 5 year inflation expectations remain well anchored in markets, but with some mixed signals from businesses and households. any sign of stronger de - anchoring would call for a stronger monetary reaction. third, we will have to look more closely at the economic activity and the cycle. in this tightening phase, unlike the phase of normalisation, the assessment of the state of the economy and projections for growth and employment will play a greater role. in case of a recession – even if it should be limited and temporary page 9 sur 14 -, we would be certain to face calls to stop the tightening. this would miss the point : to bring inflation back to target, a recession is neither necessary nor sufficient per se. a more relevant discussion will be the assessment of the slope of the phillips curves. the current and rapid increase in core inflation has led some observers to suggest that the flat phillips curve paradigm of past decades is now obsoletev. what is more likely is that price - setting in the economy is state dependent, with firms reacting by more and quicker to large shocks so that the phillips curve is non - linear and convex. in any case, we cannot bet that a steeper phillips curve will entirely do the job, allowing for a fairly “ immaculate ” disinflation. last but not least, we will need a benchmark to measure the degree of tightening. the real interest rate calculated with actual headline inflation would provide misleading signals. a better gauge is provided by medium - term forward real interest rates : they should be at least positive on all but the shortest maturities. and they could become more positive as a result of two possible changes : downward move in inflation expectations, and further upward adjustments in expected nominal interest rates. page 10 sur 14 2. 3 some initial thoughts on the balance sheet another issue that we will need to confront is the normalization of our balance sheet. it

cent. 11. so what happens to the other operations of government, including the administrative function and capital spending? in effect, these are made possible by foreign grants and domestic borrowing. thus, the priorities of government in the national budget were established years ago and are not those determined by the current parliament. those relationships established long ago continue to dominate the national budget. as the years go by therefore, the budget addresses less and less the current priorities of the government. 12. the result of this arrangement is the accumulation of arrears, a systemic problem created by the everlasting earmarking which monopolize resources and reduce the ability of the authorities to fully finance their priorities. the problems thereby created have negative implications for capital spending, private sector growth, stability of the banking system and hence overall economic growth. the problem cannot be postponed indefinitely and it needs to be urgently confronted in a resolute and bi - partisan manner. 13. mr. chairman, let me now quickly deal with two developments which are seen as heralding great economic prospects. the recent re - basing of the gdp and the imminent production of petroleum. 14. as the ghana statistical service has explained, re - basing is an exercise that needs to be undertaken regularly to maintain a realistic measure of economic developments. the new base year selected for this purpose is 2006, thirteen years since the last one. in the 17 years since the base year was last revised, the gss is saying that we underestimated the expansion in our national output by about 4 per cent per annum. on the surface of it, the rebased numbers give us much concern than comfort. it shows that we need to do more to really consolidate our position as a middle income country. our revenue / gdp ratio for instance now suggests that a lot more effort would have to be directed at revenue mobilization if we need to maintain a high level of public expenditure. 15. now to petroleum. it was a privilege to observe the diligence and rigour with which the joint session of the parliamentary committees on finance and energy examined proposals for the management of petroleum export revenues in koforidua a few weeks ago. the 2011 budget statement projects that ghana ’ s share of oil revenues will be gh¢584 million ( or 1. 9 per cent of gdp ). this is just a third of the anticipated vat collection and definitely not the sort of resource that the huge expectation of economic transformation can be built. it is obvious that