Bank Of Ghana Increases Policy Rate

Dr Kofi WampahThe Monetary Policy Committee (MPC) of the Bank of Ghana yesterday, increased the policy rate from 19 to 21 per cent.

Dr. Henry K. Wampah, the Governor of the Bank of Ghana, who announced this at a news conference in Accra, said the decision to increase the policy rate was to tackle the increasing rate of inflation.

“The committee was concerned about the outward shift in the medium term inflation path relative to the previous forecast. The latest forecast indicates that inflation would continue to remain outside the target band but expected to ease gradually towards the medium term target band of 8 plus minus 2 per cent in the first half of 2016,” he stated.

The Governor dismissed reports that the business community would have to pay more for loans from commercial banks.

He said the BOG had maintained the 24 per cent rate at which it lent to commercial banks in the country.

He said the bank’s latest survey on business confidence indicated “ a rebound in business and consumer confidence,” saying “the index improved to 88.7 from 76.6 in the second quarter”.

“The risk to growth outlook has waned on the back of strong private sector credit and the near commencement of gas production and higher oil output,” he stressed.

Dr. Wampah noted that the Atuabo Gas Processing Plant would save the country$500 million annually, which would provide government resources to meet its financial obligations and fund infrastructure and social interventions projects.

On the foreign exchange market, he said the committee had observed continued stability and improved sentiments in the foreign exchange market.

“This has been supported by earlier policy measures, inflows from Eurobond, as well as cocoa pre-export finance facility which have increased liquidity in the markets,” he said.

On government’s fiscal operations, the Governor said the country as at the end of September, recorded a budget deficit of   GH¢6.7 billion, equivalent to 5.9 per cent of Gross Domestic Product.

Dr. Wampah said government’s total revenue and grants over the period stood at GH¢17.7 billion, amounting to 15.4 per cent of Gross Domestic Product, below the target of GH¢18.4 (16 per cent of GDP).

However, he said government’s total expenditure as at the end of September, stood at GH¢24.4 billion (21.3 of GDP), compared with the budgeted ceiling of 25.8 billion (22.5 per cent of GDP).

The Governor said the shortfall in government receipts was partly due to lower import volumes, decline in commodity prices, particularly gold in the world market, and the slowdown in economic activity arising out of the energy crises.

On the country’s total public debt, Dr. Wampah said as at August 2014, the total public debt stood at GH¢65.7 billion which is 57.3 per cent of GDP up from GH¢51.9 billion (55.5 per cent of GDP) as the end of December 2013.

Domestic component of the total public debt, he said, stood as, at the end of August, at GH¢28.5 billion (43 per cent of the total), while the external debt stock was $11.9 billion (56.7 per cent of total.)

Dr. Wampah said broad money supply grew by 33.6 per cent year-on-year at the end of September, to GH¢32.1 billion, compared with a growth of 17.6 per cent in the corresponding year.

He said the banking industry asset increased by 41.0 per cent year-on-year to GH¢47.8 billion in September 2014, compared to a growth of 35.4 per cent to GH¢33.9 billion in the same period last year.

By Kingsley Asare

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