MPC reduces policy rate

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has reduced the policy rate from 14.5 per cent to 1e.5 per cent.

This was announced by the Governor of the Bank of Ghana, Dr Ernest Addison in Accra on Monday May 31.

The reduction as a result of the improvement in macroeconomic conditions on the global front and the local front.

On the domestic front, economic activities have picked up strongly, evidenced by the high frequency economic indicators. Consumer and business confidence softened, triggered by the new revenue measures and recent instability in power supply which coincided with the survey period.

These have served to dampen sentiments but are viewed as temporary and should improve in the near-term. Private sector credit growth still remains below prepandemic levels but “we expect banks to respond to the observed emergence of increased demand for loans to support the expected pickup in economic activity.

“The banking sector remains sound and profitable, with adequate levels of capital and liquidity to withstand moderate to severe shocks,” the committee said.

The industry has witnessed sustained growth in deposits, total assets, profits, and shareholder funds. The COVID–19 policy and regulatory response measures have somewhat helped to mute the effect of the pandemic
on corporates and households and are being maintained in the near-term.

There are signs that the execution of the budget for the first four months point to some improved revenue collections and expenditure containment to ensure real re-alignment to the consolidation path. The fiscal data shows that fiscal revenues have significantly outpaced developments a year ago but slightly lags behind target.

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The gap in revenue performance viz-a-viz the budgeted target has been somewhat compensated for by expenditure containment measures.

However, in the near-term the Committee noted risks in the fiscal outlook surrounding wage settlements, energy IPP payments, the potential for arrears build-up, potential for scaled-up expenditures associated with COVID-19 waves and mass vaccination efforts, and the implementation of the Ghana CARES programme, which would have to be carefully managed in a time consistent manner to minimize any deviation from the path of fiscal consolidation.

By Laud Nartey||Ghana


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