Ghana Reduces Key Policy Rate

Dr Ernest Addison, Governor, BoG

Accra, Ghana, May 21, 2018//-The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) today reduced its policy rate from 18 percent to 17 percent.

The Governor of BoG who is also Chairman of the MPC, Dr Ernest Addison told journalists in Accra that the decision to reduce the policy rate was based on disinflation pressures, stability of the cedi, among others.

The policy rate is the rate at which the central bank does overnight lending to commercial banks in the country.

With this reduction, all the 34 commercial banks in the country are expected to reduce their base rates.

Reviewing the health of the Ghanaian economy, he noted that domestic economic activity remains strong as non-oil growth continued to show signs of a rebound following the slowdown in the last few years.

” We have however observed some moderation in economic activity in the first quarter of 2018 as measured by leading indicators monitored by the Bank. For instance, the Bank’s Composite Index of Economic Activity (CIEA) recorded a 2.3 percent year-on-year growth in the first quarter of 2018, compared with 4.5 percent over the same period last year”.

However, the latest business and consumer confidence surveys show continued optimism based on improving macroeconomic fundamentals and realization of expectations, despite lingering concerns on employment opportunities by consumers, Dr Addison noted.

The pace of growth in key monetary aggregates moderated as aggregate demand pressures remained subdued. Annual growth in broad money supply (including foreign currency 3 deposits) slowed to 17.5 percent in April 2018 from 26.6 percent last year.

On fiscal operations, Dr Addison explained to the journalists that the provisional March 2018 data indicates that budget execution is in line with programme, but early indications from April banking data underscores the need for ramping up revenue mobilization to match the corresponding expenditure flows.

” Provisional data for the first quarter of 2018 show that revenue and grants amounted to GH¢9.4 billion (3.9% of GDP), representing 86.6 percent of target. Total expenditures amounted to GH¢12.9 billion (5.2% of GDP) and 94.3 percent of the target for the period.

These developments resulted in an overall cash deficit of 1.3 percent of GDP, in line with the target for the first quarter of 2018 and same for the corresponding period of 2017″.

External dev’t

The favourable external developments from last year continued into the first quarter of 2018. Prices of Ghana’s major exports have firmed up across board. Crude oil prices have increased by 11.5 percent since the beginning of the four year to an average of US$71.7 per barrel in April 2018 due to oil supply constraints amid geopolitical and trade tensions.

Similarly, gold prices gained 5.4 percent to US$1,334.9 per fine ounce, supported by rising inflation expectations, pickup in jewellery demand and general trade tensions.

Cocoa prices are also rebounding due to improved grinding data and cut back in cocoa production. Cocoa prices firmed up by 39.8 percent to US$2,664.0 per tonne in April 2018.

 African Eye Report

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