Central Bank prime rate hiked by 100 basis points
The Central Bank has once again increased its monetary policy rate by 100 basis points (1%).
On the back of the increment, the Bank of Ghana’s monetary policy rate rises to 28% from the previous rate of 27%
Cumulatively, the policy rate hikes by the Central Bank since November 2021, comes to some 1,350 basis points (13.5%).
The hike in policy rate by the BoG is on the back of the increment in the country’s headline inflation rate which hit a record high of 54.1% in December.
Given the hike in policy rate, interest rates on loans to the private sector is expected to increase, further making costs of production by businesses in the country more expensive.
Announcing the new policy rate, the Governor of the Central Bank, Dr Ernest Addison, noted the Bank’s decision to increase the policy rate is due to the fact that, “the interim, the MPC sees the need to remain vigilant and moderate liquidity in the system to underpin macroeconomic adjustments taking place to drive inflation on a downward path. Under the circumstances, the Committee decided to increase the policy rate by 100 basis points to 28 percent.”
Meanwhile, provisional data on budget execution for the period January to November 2022 indicated an overall broad fiscal deficit (cash) of 9.8 percent of GDP, against the programmed target of 6.7 percent of GDP. The corresponding primary balance for the period was a deficit of GH¢18.8 billion (3.1 percent of GDP), against a deficit target of GH¢3.1 billion (0.5 percent of GDP).
Over the review period, total revenue and grants was GH¢81.8 billion (13.3 percent of GDP), short of the projected target of GH¢84.0 billion (13.6 percent of GDP). Total expenditure of GH¢142.2 billion (23.1 percent of GDP) was above the programmed target of GH¢125.4 billion (20.4 percent of GDP). The deficit of GH¢60.4 billion was financed mainly from the domestic sector.
Ghana’s key export commodities prices remained volatile on the global markets. Average crude oil prices, on year-on-year terms, increased by 81.3 percent, rising from US$85.5 per barrel in January 2022 to a high of US$117.2 per barrel in June on supply concerns, before retreating to US$81.3 per barrel in December on the back of reduced demand amid recession fears.
Cocoa futures traded largely in the negative during most parts of 2022. Prices peaked at US$2,681.11 per tonne in February, on the back of lower production volumes, and thereafter eased to a low of US$2,333.33 per tonne in July 2022 owing to weak grind data.
At the end of 2022, cocoa prices rose to US$2,538.6 per tonne, representing 2.3 percent year-on-year growth. Gold prices hit record levels of US$1,949.4 per ounce in March, benefiting from heightened global uncertainties, but weakened later due to interest rate hikes and a stronger US dollar to end the year at US$1,796.2 per ounce, representing 8.7 percent annual growth.
The trade surplus more than doubled to US$2.8 billion in the 2022 compared with US$1.1 billion in 2021. This was driven by higher exports growth, relative to the growth in imports. Total exports increased by 18.2 percent year-on-year to US$17.4 billion, driven by crude oil, gold and other exports earnings.
This compares with US$14.7 billion export earnings recorded in 2021. In detail, crude oil export earnings reached US$5.4 billion, driven by sharp increases in prices, from US$3.9 billion in 2021, representing an increase of 37.5 percent in year-on-year terms. Gold exports also rose by 30.0 percent to US$6.6 billion, on the back of increased volumes from small-scale gold production.
Cocoa exports, however, declined to US$2.2 billion from US$2.8 billion, reflecting both price and volume reductions. Other export earnings, including non-traditional exports, reached US$3.2 billion, an increase of 10.2 percent.
At the end of December 2022, the stock of Gross International Reserves stood at US$6.2 billion (equivalent to 2.7 months of import cover) from a stock position of US$9.7 billion (equivalent to 4.4 months of import cover) at the end of December 2021. The Net International Reserve position stood at US$2.4 billion, from US$6.1 billion over the same comparative period.
