The Monetary Policy Committee of the Bank of Ghana (BoG) has announced the reduction of the bank’s monetary policy rate by 200 basis points from 20.0 percent to 18.0 percent.
Dr Ernest Addison, Governor of BoG, who disclosed this to the media in Accra, said the committee discovered that the current inflation forecast provided scope for monetary policy to realign interest rates.
Foreign exchange
He also said the foreign exchange market had remained calm over the first quarter of 2018 on the back of subdued demand pressures alongside improved foreign exchange liquidity.
Cumulatively, the local currency had appreciated by 0.2 percent against the US dollar in the year to March 23, 2018 compared with a depreciation of 5.0 percent during the same period in 2017.
Trade
Dr Addison mentioned that provisional trade data for the first two months of 2018 indicated a trade surplus of US$584.5 million (1.1% of GDP) on the back of higher export receipts from crude oil.
“This compares with a trade surplus of US$494.3 million (1.1% of GDP) recorded over the same period in 2017. The trade surplus is expected to translate into a current account surplus in the first quarter of 2018, and further into a strong external position.
“There was a drawdown in international reserves largely reflecting seasonal foreign exchange flows, planned sovereign bond coupon payments and Energy Sector Levy Act (ESLA) related payments. As a result, Gross International Reserves (GIR) stood at US$6.9 billion (3.8 months of import cover) as at March 20, 2018 compared to US$7.6 billion (4.3 months of import cover) as at December 2017.
Budget deficit
“Provisional data on government operations indicated an overall budget deficit of 6.0 percent of GDP in 2017, against the target of 6.3 percent. Total revenue and grants was 20.0 percent of GDP, below the target of 21.3 percent and total expenditures, including arrears clearance, was 26.0 percent of GDP below the budgeted estimate of 27.7 percent.”
Debt
The total public debt declined from 73.1 percent of GDP in December 2016 to 69.8 percent of GDP (GH¢142.5 billion) at the end of 2017.
Of the total, domestic debt was GH¢66.7 billion and external debt was GH¢75.8 billion.
Private sector credit
Noting that recovery in the private sector credit was slow, he said credit to the private sector grew by 11.7 percent in January 2018 compared to 15.2 percent a year earlier.
In real terms, he said private sector credit expanded by 1.2 percent against 2.1 percent growth in January 2017, adding that the latest credit conditions surveys also showed overall net tightening in credit stance to enterprises.
“This was attributed to banks’ current and expected capital positions, as well as changes in the share of adversely classified loans.”
By Samuel Boadi