Accra, Sept. 19, GNA – The Bank of Ghana (BoG)
held its policy rate unchanged at 26 per cent for the fifth time on the back of
continued cedi stability and easing inflation pressures.
The Central Bank Governor, Dr Abdul-Nashiru
Issahaku, said while headline inflation was trending upwards, reaching 16.9 per
cent in August, the Bank’s measure of Core inflation, which excluded energy and
utility prices, continued to trend downwards.
He told a media conference after a meeting of
the Monetary Policy Committee (MPC) that based on the development, inflation
would hit the Bank’s target of eight per cent, plus or minus two percentage
points, by the second quarter of 2017, rather than the third as previously
“At this MPC meeting, the inflation forecast
showed a slight inward shift in the horizon to the second quarter, instead of
the third quarter of 2017,” Dr Issahaku said.
He said the continued monetary and fiscal
policy tightness, together with stability in the foreign exchange market should
support the disinflation process.
“The upside risks to the inflation outlook are
the unanticipated shocks, especially with regard to the intermittent upward
adjustments in petroleum and utility prices, and their second round effects,”
Dr Issahaku said growth conditions were
expected to improve over the medium-term, supported by the sustained
improvement in the power sector and increased oil and gas production.
However, tighter fiscal consolidation,
declining private sector credit and delayed recovery in commodity prices could
On execution of the Government’s budget for
the first half of 2016, Provisional data showed a deficit of 3.1 per cent of
GDP against a target of 2.6 per cent.
Dr Issahaku said the higher than programmed
deficit was primarily driven by shortfalls from income and property taxes and
oil revenue, adding, however, that the Government’s expenditures were broadly
He said the deficit was financed mostly from
domestic sources that included a drawdown on Government deposits with the
The major risks to the fiscal outlook include
uncertainties in the international oil market, continued weakness in tax
revenue mobilisation and wage pressures.
“The materialisation of these risks could slow
the pace of fiscal consolidation and hinder efforts to restore macroeconomic
stability,” Dr Issahaku said, adding that, the sustenance of the fiscal
consolidation process was critical to attaining the medium-term inflation
Dr Issahaku said the external trade deficit
widened in the first half of 2016, on account of lower export receipts,
especially for crude oil.
However, its overall effect on the current
account balance was moderated by lower outflows from the services account.
The provisional outturn of the current account
balance, therefore, improved to a deficit of 2.6 per cent of GDP, compared with
2.8 per cent in the same period of 2015.
On the cedi’s performance, Dr Issahaku said
the local currency had been relatively stable since the beginning of the year,
cumulatively depreciating by 4.1 per cent as at September 15, 2016 compared
with 16.0 per cent depreciation in the same period of 2015.
The Governor said the stability in the cedi
was achieved on the back of tight policy stance and improved foreign exchange
He said the stability of the currency was
expected to be sustained, supported by the continued policy tightness, proceeds
from the recently issued Eurobond, inflows from donors and the pre-export
finance facility for cocoa.
The Committee would continue to monitor
developments in the economy and take appropriate actions, if necessary, towards
attaining the medium-term inflation target over the forecast horizon, he added.