The Bank of Ghana has announced its decision to maintain the Monetary Policy Rate (MPR) at 29.0 percent, following a careful review of the economic landscape.
According to Governor Dr. Ernest Addison, the decision was made because “risks to inflation are slightly on the upside,” which he advised will require close monitoring.
The Governor told journalists in a news conference for its 117th Monetary Policy announcement yesterday, Monday, 25th March, 2024 in Accra, that although inflation rose slightly in January 2024 and edged down in February, the latest inflation forecast suggests a slightly elevated profile from the possible upward revision in transport fares, adjustment in utility tariffs, higher ex-pump prices and some pass through of exchange rate depreciation.
“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”, he explained.
According to Dr. Addison, the global growth momentum has been largely supported by resilience in some major advanced economies and emerging markets, as well as a projected rebound in the Euro Area.
Global growth is forecasted at 3.1 percent for 2024, unchanged from the previous year, with inflation expected to decline further, due to easing food and energy prices and tight monetary policy.
In the domestic economy, Dr. Addison noted that the growth out-turn for 2023 exceeded expectations, with fourth-quarter GDP growth reaching 3.8 percent driven by all three sectors and the Ghana Composite Index of Economic Activity (CIEA) also improved, affirming the rebound in economic activity.
However, private sector credit remained sluggish, due to banks’ risk aversion as asset quality weakened over the period.
He added that the banking sector is reported to remain stable, with improving liquidity and profitability positions.
Out of 23 banks, more than half are fully capitalised and most outstanding banks have met a significant portion of the required recapitalisation.
The governor continued that the fiscal policy implementation has been broadly consistent with targets under the IMF ECF-supported programme, although vigilance is required to ensure effective commitment control in 2024.
Revenue flows are expected to pick up as the deadline for filing tax returns approaches.
“Although the primary fiscal balance target for 2023 was attained, the fiscal assessment is made on commitment basis. This will require vigilance to ensure that commitment control is effective in 2024.
“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. It is expected that revenue flows will pick up in March as the deadline for filing tax returns in April approaches,” he further added.
