The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has for a record fifth time maintained its policy rate.
Announcing the policy rate at the 97th MPC press briefing on November, 23, Governor of the Central Bank, Dr Ernest Addison noted that reduced inflationary pressures coupled with general improved macroeconomic conditions informed the Committee’s decision to maintain the prime rate at 14.5%.
“Global conditions continue to be supportive, domestic inflation is easing, growth prospects are improving, crude oil prices have stabilized, monetary aggregates have expanded but with minimal impact on inflation, the current account deficit is stable, remittances inflow has remained firm, the exchange rate has been stable and reserve buffers continue to remain strong. Under the circumstances, the Committee’s decided to maintain the policy rate at 14.5 percent,” he stated.
The MPC’s decision to maintain the policy rate comes as no surprise, as economist in the country prior to today’s press briefing stated that they expected the Central Bank to maintain the policy rate given the downward trend of inflation rate.
The policy rate in March 2020 was reduced by 150 basis points to 14.5 per cent and has since then been maintained at 14.5 per cent.
This is unprecedented as never has the Central Bank, for 5 consecutive times maintained its policy rate.
The reduction in the policy rate was to aid stimulate economic activities in the wake of the Covid-19 pandemic.
Meanwhile, Gross International Reserves at the end of October 2020 according to the Central Bank was $8,627.4 million, equivalent to 4.0 months of import cover of goods and services.
Also, the nation’s current account for January to September 2020 improved marginally, recording a deficit of $1,267 million (1.9 percent of GDP) compared with a deficit of $1,497 million (2.2 percent of GDP) for the same time in 2019.
The current account outturn was supported by stable inflows in current transfers, especially remittances, and lower net investment income outflows, particularly profits and dividends.
Also, budget implementation through September 2020 was broadly in line with the revised mid-year Budget estimates following the introduction of fiscal measures to combat the COVID-19 pandemic.
Provisional data for the first three quarters of 2020, showed an overall budget deficit of 9.0 percent of GDP against the target of 8.9 percent of GDP.
The primary balance also recorded a deficit of 4.1 percent of GDP, marginally above the target of 4.0 percent of GDP. Over the review period, total revenue and grants amounted to GH¢36.3 billion (9.4% of GDP) compared with the target of GH¢35.7 billion (9.3% of GDP).
Total expenditures and arrears clearance amounted to GH¢70.9 billion (18.4% of GDP), marginally above the target of GH¢70.0 billion (18.2% of GDP). The deficit was financed mainly from domestic sources.
The policy rate by the MPC is the interest rate at which the Central Bank lends to commercial banks which forms the benchmark for interest rates on loans by commercial banks to the public.
