MPC maintains prime rate at 15.5%

Accra, Nov. 28, GNA - The Monetary Policy Committee (MPC) of the Central Bank has decided to maintain the Prime Rate at 15.5 per cent, citing the progressive easing of inflationary expectations and shifts in savings, investment and lending portfolios associated with the recent realignment in interest rates.

Briefing journalists in Accra after the meeting of the MPC on Monday, Dr. Paul Aqcuah, Governor of Bank of Ghana described the outlook for the economy as bright and positive.

He said economic fundamentals had continued to be robust, providing a basis for attainment of single digit inflation in 2006. However, Dr Acquah said the volatility in crude oil prices on the international market remained a major risk, as a surge would be a significant source of pressure on the external payments position and domestic price inflation.

He said the exchange rate had stabilized in a relatively liquid foreign exchange market, and was hopeful that the targeted reduction in the overall deficit from 2.4 per cent of GDP to 2.1 per cent of GDP as envisaged in the 2006 budget would provide further stimulus to the private sector and a cut in the domestic debt to GDP ratio to 8.5 per cent.

Dr Acquah said the private sector continued to receive the bulk of the credit flow, accounting for about 72.3 per cent, with an outstanding credit to the private sector as at the end of September stood at 13.7 per cent of GDP.

He said the expansion in credit was however concentrated in the services, commerce and finance, manufacturing and import trade sub-sectors.

On the banking system, the Governor said it had shown a strong asset growth and improving capital base.

Total assets of the banking system grew by 22.3 per cent on an annual basis to 34.7 trillion cedis by the end of September 2005. Dr. Acquah said despite the significant growth in credit Non-performing loans ratio was stagnant at the previous quarters level of 13.3 per cent.

He said the external payments position continued to reflect an expansion in trade and payments transactions. Provisional estimates showed that total exports of goods amounted to 2.1 billion dollars and is projected to reach 2.7 billion dollars at the end of the year.

The traditional exports, Cocoa, Gold, Timber continue to hold sway, accounting for the bulk of the export earnings, although the non-traditional exports sector had shown increased performance reaching 546 million compared with 449.8 million in 2004.

The Governor said non-oil imports were estimated to amount to 2.7 billion dollars and expected to reach 3.7 billion dollars. The oil bill amounted to 694.5 million dollars as at September.

He said the overall balance of payments position was in deficit of 173.19 million through the third quarter, a decline from 191.48 million in the corresponding period of last year.

"The overall balance is projected to record a surplus of 155 million dollars at the end of the year.

Dr Acquah said Gross International Reserve position of Bank of Ghana stood at 1.650 billion dollars in October and translates into 3.3 months import cover for 2005. 28 Nov. 05