The Monetary Policy Committee of the Bank of Ghana has kept its policy rate at 29 per cent, saying inflation risks were still on the upside and required close monitoring.
‘Overall, risks to inflation are slightly on the upside and will require close monitoring. Given these considerations, the committee decided to maintain the monetary policy rate at 29 per cent,’ Dr Ernest Addison, the Governor of the Bank of Ghana, said at a press briefing.
‘The pace of inflation has slowed in the year’s first two months. However, inflation rose slightly in January 2024 and edged down in February. The latest inflation forecasts suggest a slightly elevated profile on the possible upward revision in transport fares, an adjustment in utility tariffs, higher export petroleum prices and some pass-through of exchange rate depreciation.
He said the Committee noted the stronger global growth outturn than expected, the continued decline in global inflation and the stronger United States Dollar.
Dr Addison said the growth momentum
was largely supported by resilience in some major advanced economies and emerging markets and a projected rebound in the Euro Area.
These positive developments are expected to spill over into 2024 with global growth forecast at 3.1 per cent, unchanged from 2023.
He said in the outlook, global inflation is expected was decline further, but increasing geopolitical tensions and potential supply constraints associated with developments in the Red Sea could pose some major risks to the outlook.
The Governor said global financing conditions have remained tight despite easing inflation due to near-term risks such as escalating developments in the Middle East, which may impact energy prices, and force central banks to keep rates tighter for longer.
On the domestic economy, the growth outturn for 2023 was stronger relative to target while the fourth quarter GDP growth of 3.8 per cent was driven by all three sectors.
He said the updated CIEA also improved further in January, following the upturn in December 2023,
affirming the rebound in economic activity.
‘This was supported by broad improvements in sentiments, amid improvement in the PMI reflecting some uptick in business purchasing activity and new orders,’ he added.
He said private sector credit, however, remained sluggish explained by the risk aversion of banks as asset quality weakened over the period.
He said external sector conditions remained positive, with improving reserve buffers and this notwithstanding, the exchange rate came under strong demand pressures in the first few months of the year.
The Governor said looking ahead, however, inflows from the World Bank, the tight monetary policy stance, and a weaker US dollar from potential policy rate cuts in the US, were expected to support the relative stability of the Ghana cedi.
Broadly, the banking sector remains stable, despite the elevated credit risks with the Bank’s liquidity and profitability positions have continued to improve.
Out of a total of 23 Banks, more than half are fully capitalised and
do not need recapitalisation.
He said most of the outstanding banks have met more than two-thirds of the required recapitalisation over three years within one year as of the end of 2023.
Dr Addison said the fiscal policy implementation so far had been broadly consistent with targets under the IMF ECF-supported programme.
He said although the primary fiscal balance target for 2023 was attained, the fiscal assessment was made on a commitment basis, and this would require vigilance to ensure that commitment control was effective in 2024.
He said revenue flows in the first two months of the year were lower vis-a-vis targets, and expenditure has been fast-paced driven largely by clearance of arrears in the energy sector.
It is expected that revenue flows will pick up in March as the deadline for filing tax returns in April approaches.
Source: Ghana News Agency