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The Bank of Ghana kept its Policy Rate unchanged at 16.0 percent for the sixth meeting in a row as the Monetary Policy Committee takes a cautious outlook to growth and inflation.
Dr Ernest Addison, the Governor of the Bank of Ghana, said the decision was taken to maintain the rate despite a fairly resilient and robust economic performance with regard to output growth and a strong trade and payments position.
The economy is positioned firmly on the path of stability with inflation forecasted to stay within the medium-term target band of 8±2 percent, barring any unanticipated shocks, he said.
“Under these circumstances, the Committee viewed risks to the inflation and growth outlook as broadly balanced, and therefore decided to keep the Monetary Policy Rate unchanged at 16.0 percent, while standing ready to take decisive policy actions when necessary to ensure that inflation remains within the target band,” he said.
The committee met during the week and deliberated on the recent global and domestic economic conditions, reviewed the latest macroeconomic projections, and subsequently took a decision on the positioning of the Monetary Policy Rate.
Dr Addison said results from the Bank’s latest confidence surveys conducted in December 2019 showed significant improvement in consumer confidence reflecting optimism about current and future economic conditions.
Business confidence, on the other hand, softened marginally on account of the exchange rate depreciation in November 2019. However, businesses expressed positive sentiments about industry prospects and declining interest rates.
He said growth in the key monetary aggregates firmed up in 2019, driven largely by increased accumulation of net foreign assets by the Bank of Ghana.
Broad money supply recorded an annual growth of 21.6 percent in December 2019 compared with 15.4 percent a year ago, driven by increased deposits as the clean-up process boosted a return to confidence in the banking sector.
Dr Addison said private sector credit grew by 18.3 percent year-on-year to GH¢44.5 billion in December 2019, compared with 10.6 percent in December 2018.
In real terms, private sector credit growth was 9.7 percent, benefitting almost all the key economic sectors to record higher credit growth in 2019 relative to 2018.
The major sector beneficiaries were Services with 24.1 percent, Commerce and Finance with 20.9 percent, and Manufacturing with 10.9 percent.
He said total exports increased by 4.6 percent year-on-year to US$15.6 billion in 2019, driven mainly by 14.6 percent growth in gold exports and 8.6 percent growth in cocoa beans and products.
On the other hand, imports grew at a slower pace of 1.5 percent to US$13.3 billion on account of a 4.2 percent growth in non-oil imports, while oil and gas imports contracted by 9.2 percent.
These developments resulted in a trade surplus of US$2.3 billion (3.4 percent of GDP) in 2019, compared with US$1.8 billion (2.8 percent of GDP) in the same period of 2018.
Gross International Reserves at the end of December 2019 stood at US$8.4 billion, providing cover for 4.0 months of imports of goods and services. The reserve level compared with a position of US$7.0 billion, equivalent to 3.6 months of import cover was recorded at the end of December 2018.
The Ghana cedi depreciated by 12.9 percent against the US dollar in 2019, compared with 8.4 percent depreciation in 2018.
Against the British pound and Euro, the Ghana cedi cumulatively depreciated by 15.7 and 11.2 percent respectively, compared with 3.3 and 3.9 percent over the same period in 2018.
By January 29, 2020, the Ghana cedi had recovered, appreciating by 0.3 percent compared with a depreciation of 2.5 percent in the same period of 2019.
Provisional budget estimates from January to December 2019 indicated that total revenue and grants amounted to GH¢52.97 billion (15.3 percent of GDP) compared with the projected target of GH¢54.56 billion (15.8 percent of GDP).
Total expenditures, including arrears clearance was GH¢67.67 billion (19.6 percent of GDP), below the target of GH¢70.19 billion (20.3 percent of GDP).
These developments resulted in an overall fiscal deficit (on a cash basis) of 4.8 percent of GDP, slightly above the target of 4.7 percent of GDP but below the 5.0 percent fiscal rule.
In line with these developments, the provisional estimates indicate that the stock of public debt rose to 62.1 percent of GDP (GH¢214.9 billion), at the end of November 2019 compared with 57.9 percent of GDP (GH¢172.9 billion) at the end of November 2018.
Of the total debt stock, domestic debt was GH¢102.9 billion, while external debt was GH¢111.9 billion with a share of 52.1 percent in the total public debt.