The Bank of Ghana said on Tuesday that it would maintain its prime rate unchanged at 24.5 per cent, citing improved conditions in the macro-economic environment. Dr Paul Acquah, Governor of the Bank of Ghana, told a press conference in Accra that the Bank's lending rate to commercial banks and some financial institutions would remain constant due to the positive inflationary and exchange rate outlook.
Inflation had declined from 21 per cent as at the end of December last year to 16 per cent at the end of March this year. Dr Acquah said the inflation figures in the first quarter provided strong evidence that the economy was still firmly on a disinflation path.
"It is a significant movement towards the end-year target of 13 per cent, and the ultimate goal of achieving low single digit inflation," he said. "Short-term interest rates have stayed firm, converging toward the prime rate. The base lending rates of the major commercial banks also dropped to 27 per cent by March 2002."
Dr Acquah expressed the hope that budgetary targets, especially a significant deficit reduction and a sharp cut back in the domestic borrowing requirements, should allow the process of disinflation to continue.
The budgetary stance also means that the private sector savings and bank lending should begin to be channelled more into private sector activity and less into meeting the central government borrowing needs, he said.
The Governor said the success of the Consultative Group Meeting on Ghana also indicated that with continued fiscal prudence and deepening structural reforms to improve productive efficiency of the economy and allocation of resources, external financing requirements would be made available to underpin fiscal policy as well as provide balance of payments support for the year.
Dr Acquah said the 250 million dollars debt relief that the country would derive from the Highly Indebted Poor Countries (HIPC) initiative would provide a relief and stabilising influence on the exchange market this year.
He said although the cedi had depreciated against major international currencies in the quarter, the movements should be seen in the context of a sharp reduction in the growth of the monetary aggregates, the normal level of foreign exchange inflows and purchases on the domestic market.
The dollar started the year at about 7,150 cedis for buying and 7,361 for selling on the interbank market. It is now 7,567 cedis for buying and 7,755 cedis for selling.
