BoG maintains policy rate at 12.5%

By Kofi Ahovi The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has maintained its policy rate at 12.5% for the second time. The policy rate is the rate at which the central bank does overnight lending to universal banks in the country. The committee maintained the rate based on a number of factors including, strong revenue mobilization, the pick-up of economic activity, and positive macro-economic conditions. The Governor of the BoG, Kwesi Amissah-Arthur who announced this at press conference in Accra, today said, “Given the assessments and the balance of risks to inflation and growth, the MPC has decided to maintain the Monetary Policy Rate at 12.5%.” The release of the September inflation data by the Ghana Statistical Service indicated that the rate of inflation has stabilised at 8.4% from 8.41% in August 2011. Between June and September, food inflation rose by 0.9% while non-food inflation declined by 1.1%. Core inflation, which measures underlying inflation pressures and excludes volatile energy and utility price changes, remained fairly stable in the third quarter, rising by a marginal 0.2%. Results of the bank’s recent survey on inflation expectations show that consumers and financial institutions are optimistic that inflation would remain within single digits by the end of 2011. Bank of Ghana’s Composite Index of Economic Activity (CIEA), which is constructed to provide early indication of developments in GDP, was 293.4 in August 2011, representing a real growth of 17.4% over the August 2010 level. With the exception of tourist arrivals, all the other indicators contributed positively to the growth in the index. The latest consumer and business confidence surveys produced mixed outcomes. While consumer confidence improved, business confidence dropped marginally. Provisional data on the execution of the budget show that total revenue and grants for the first three quarters of 2011 amounted to GH¢7.4 billion, representing a growth of 46.5% over the same period in 2010. The receipts comprised GH¢6.1 billion of tax revenues and non-tax revenue (including grants) of GH¢1.4 billion. Tax revenue for the period was higher than the corresponding period by GH¢2 billion reflecting improved performance of import duty, import VAT, petroleum tax and domestic direct taxes. Total expenditures amounted to GH¢8.7 billion, showing an increase of 37.1% over the corresponding period of 2010. The bulk of the expenditures were in respect of personal emoluments of GH¢3.3 billion and MDA spending of GH¢1.8 billion. The budgetary operations of government thus resulted in a deficit of GH¢1.3 billion, which was financed from domestic sources. The Net Domestic Financing (NDF) of GH¢1.3 billion was within the target of GH¢1.5 billion. The total public debt stock at end September was GH¢22.2 billion, equivalent to 41.7 % of GDP, up from GH¢17.5 billion or 37.8% of GDP in December 2010. Of the total debt, the domestic component was GH¢11.4 billion while the external portion was GH¢10.8 billion (US$7.1 billion).