BoG Maintains Policy Rate At 14.5%

Dr. Ernest Addison

FOR A record fifth time, the Bank of Ghana (BoG) has maintained its policy rate at 14.5 per cent.

Governor of the bank, Dr. Ernest Addison, who disclosed this to the media in Accra after the Monetary Policy Committee (MPC)’s 97th meeting, said this decision was informed by reduced inflationary pressures coupled with general improved macroeconomic conditions.

He said “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 decided to maintain the policy rate at 14.5 per cent.”

He also said the MPC reduced the bank’s policy rate by 150 basis points to 14.5 per cent in March 2020 and had since maintained that also in part to the downward trend of the country’s inflation rate.

According to Governor Addison, the cut in the bank’s policy rate was aimed at rousing economic activity following the outbreak of the Covid-19 pandemic.

Provisional data for the first three quarters of 2020 showed an overall budget deficit of 9.0 per cent of GDP against the target of 8.9 per cent of GDP.

The primary balance also recorded a deficit of 4.1 per cent of GDP, marginally above the target of 4.0 per cent 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 country’s current account for January to September 2020 also saw a marginal improvement, recording a deficit of $1,267 million (1.9 per cent of GDP) compared with a deficit of $1,497 million (2.2 per cent of GDP) for the same time in 2019.

The BoG added that Gross International Reserves (GIR) at the end of October 2020 recorded $8,627.4 million, equivalent to 4.0 months of import cover of goods and services.

BY Samuel Boadi

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