BoG Monetary Policy Rate Remains 16%


The Bank of Ghana monetary policy rate has been maintain at 16% mainly due to On the balance of risks, the Committee held the view that risks in the outlook for inflation and growth are balanced and therefore decided to keep the policy rate unchanged at 16 percent. The policy rate informs the rate at which universal banks lends to the individuals, public and private sector business.

According to the Bank, Global economic policy discourse has continued to centre on the challenges facing the world economy and the policy actions needed to strengthen economic recovery. Growth remains subdued, while market volatility and stability risks persist. Economic activity in advanced economies has recorded some improvements.

“In contrast, the growth momentum in emerging and developing markets has slowed, with challenges arising from domestic and external developments. Inflation is expected to remain generally stable in advanced countries, supported by a slowdown in commodity price movements. In major emerging market economies, however, inflation is relatively higher, a problem that has been magnified by the exchange rate depreciation of recent months.”

Domestic Economic Developments: Inflation and Growth

The latest inflation numbers show that after six consecutive months of increases in headline inflation, which pushed the inflation rate to 11.8 percent in July, inflation fell marginally to 11.5 percent at the end of August.


Government Fiscal Operations

Preliminary fiscal data for the first seven months of the year indicate that both revenue and expenditure remained below their respective targets. However, the shortfall in revenue was much higher than the reduction in expenditure.? Total revenue and grants was GH?10.4 billion, lower than the target of GH?12.5 billion mainly as a result of shortfalls in domestic revenue collections and low disbursement of grants. Of this outturn, domestic revenue totaled GH?9.8 billion, below the target of GH?11.6 billion. Total tax revenue amounted to GH?7.7 billion, lower than the target of GH?9.1 billion. Grant disbursements were GH?542 million, falling short of its target by 41.7 percent.

Monetary and Banking Sector Developments

Growth in monetary aggregates moderated further in July 2013. Broad money supply (M2+) grew by 4.4 percent in July 2013, compared with 29.6 percent in the same period last year. This continued to be driven by declines in the annual growth of foreign currency deposits to -0.2 percent in July 2013 compared to 34.4 percent in the same period in 2012.


Summary and Outlook:

In summary, global economic conditions remain mixed as recovery in advanced economies continues to be countered by a slowdown in emerging markets. These together with trends in commodity prices continue to pose significant risks to the external outlook with direct implications for the domestic economy. The external sector was partly affected by the recent developments on the global front, especially with weak commodity prices in the first half and a slowdown in portfolio inflows.? Although the overall impact has been muted by slower growth in imports and significant improvements in the capital and financial accounts, risks to the outlook continue to emanate from uncertainties in the global financial markets.

BY:Joshua Sowu

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