Inflation continues to fall since February 2003

Accra, May 21, GNA - Developments in the Consumer Price Index since the beginning of 2004 indicate steady fall in the rate of inflation, a release from the Bank of Ghana Monetary Committee on Friday said. It said headline inflation dropped from its January 2004 level of 22.4 per cent to 11.3 per cent in February; 10.5 per cent in March but ticked up to 11.2 per cent in April as a result of a seasonal surge in food prices. The underlying monthly increases in the price index since April last year, remained within range that was the lowest in recent years, with considerably reduced volatility.

The release, made available to the Ghana News Agency, said the growth in monetary aggregate continued on a downward trend. Year-on- year money (M2+) growth declined from 41.5 per cent in March 2003 to 37.7 per cent by March 2004, following the year-on-year growth in reserve money, which declined from 30.7 per cent in March 2003 to 28.9 per cent in March 2004. It said fiscal developments for the first quarter of 2004 indicate that domestic revenue performance was on track but Government expenditure was higher than budgeted.

Total Government receipts for the first quarter amounted to 4,026 billion cedis compared to total payments of 4,769 billion cedis thus resulting in net domestic financing of Government by 656.0 billion cedis with the remaining support coming from external sources. In first four months of the year the benchmark 91-day Treasury bill rate increased marginally from 17.6 per cent in February 2004 to 18.0 per cent in April 2004.

Interbank money market rates moved from 15.8 per cent by February 2004 to 15.3 per cent at the end of April 2004, while commercial bank base rates were kept between 25.5 per cent and 27.0 per cent, significantly above money market rates. The release said there continued to be a shifting market preference in favour of long-dated government maturities. The share of 91-day Treasury Bills declined to 38.4 per cent by April 2004. This compares to a share of 43.3 per cent in December 2003. The share of one-year note on the other hand increased from 13.3 per cent in December 2003 to 17.0 per cent at the end of April 2004.

The Bank of Ghana's Composite Indicator of Economic Activity showed that economic activities were on the increase in the first quarter. Furthermore the findings showed increasing business confidence. The release said the annual growth of credit to private and public enterprises from domestic money banks at the end of March 2004 was 56.1 per cent compared to 3.7 per cent during the same period in 2003. Nearly 78.0 per cent of the credit went to the private sector. Provisional balance payment figures showed the strengthening of external payments position in the first quarter of 2004. Merchandise trade recorded a deficit of 6.5 million dollars in the first quarter compared to 139 million dollars for the same period in 2003.

Oil imports for the first quarter of 2004 amounted to 141.5 million dollars lower than the 165.4 million dollars recorded for 2003- a drop of seven per cent in crude oil volume. Cocoa earnings was 218 million dollars; gold fetched 295 dollars; remittances from abroad was 611.5 million dollars and the Gross International Reserves, which reached a level of 1,422 million dollars (slightly over four months of imports) in December 2003 stayed at same level by April 2004.

The cedi exchange rate with foreign currencies remained relatively stable. It depreciated by two per cent and 3.9 per cent against the dollar and pound sterling, respectively. The statement said the current crude oil price of 40 dollars a barrel posed a risk to the economy. "Given the balance of risks in the economic outlook and for inflation, the Monetary policy Committee has decided to reduce the bank of Ghana Prime rate from 20 per cent to 18.5 per cent", the release said.