Governor of the Bank of Ghana (BoG) Dr Ernest Addison has stated that Fiscal policy implementation so far has been broadly consistent with targets under the International Monetary Fund External Credit Facility (IMF ECF) supported programme.
Although the primary fiscal balance (Total Revenue less Total Non-Interest Expenditure) target for 2023 was attained, he said, the fiscal assessment is made on a commitment basis.
This will require vigilance to ensure that commitment control is effective in 2024, he said while addressing the 117th Monetary Policy Committee (MPC) press conference in Accra on Monday, March 25.
The MPC decided to maintain the policy rate at 29 %. Dr Addison stated although the inflation rate dropped marginally in February, there was a need to further monitor the trends hence the decision to keep at that rate.
“Revenue flows in the first two months of the year are lower vis-a-vis targets, and
expenditures have been fast-paced driven largely by clearance of arrears in the
energy sector.
Monetary Policy Committee keeps policy rate at 29%
“It is expected that revenue flows will pick up in March as the deadline
for filing tax returns in April approaches,” he further stated.
He further explained that in the domestic economy, the growth outturn for 2023 was stronger relative to target. The fourth quarter Gross Domestic Product (GDP) growth of 3.8 percent was driven by all three sectors.
The updated real Composite Index of Economic Activity (CIEA) recorded an annual growth of 3.5 percent in January 2024, compared to a contraction of 7.6 percent observed for the same period of 2023, affirming the rebound in economic activity.
The key growth drivers in the Index were port activity, imports, industrial consumption of electricity, domestic VAT, and tourist arrivals, he stated.
This was supported by broad improvements in sentiments, amid improvement in the PMI reflecting some uptick in business purchasing activity and new orders. Private sector credit, however, remained sluggish explained by the risk aversion of banks as asset quality weakened over the period.
“External sector conditions remain positive, with improving reserve buffers. This
notwithstanding, the exchange rate came under strong demand pressures in the first
few months of the year. 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, are expected to support the relative stability of the Ghana cedi. Broadly, the banking sector remains stable, despite the elevated credit risks. Bank’s liquidity and profitability positions have continued to improve. Out of a total of 23 Banks, more than half are fully capitalised and have no need for recapitalisation. Most of the outstanding banks have met more than two thirds of the required recapitalisation over a three-year period within one year as at the end of 2023,” he said.