Monetary Policy Committee keeps rate unchanged at 12.5 per cent

Accra, Sept 1, GNA - The Monetary Policy Committee (MPC) on Thursday kept its policy rate unchanged at 12.5 per cent, citing a positive outlook to inflation and improved macroeconomic conditions.

“The pace of economic activity has picked up, consumer confidence has improved and expectations about macroeconomic conditions are positive, the exchange rate remains stable while external sector developments continue to be favourable,” Mr Kwesi Amissah-Arthur, Governor of the Central Bank, told journalists at a news conference.

Besides, inflation expectations were well anchored and had stabilized along the single digit path supported by favourable food prices, he said, and added that the inflation target of nine per cent by the end of the year was achievable.

The meeting was to review the trends in the economy, to share recent developments and to position the Policy Rate in the Ghanaian economy.

Mr Amissah-Arthur said despite the improved macroeconomic fundamentals, there were still some risks to inflation as seen in the adjustment in utility tariffs, wage pressures and other oil–induced and external pressures that may result in the overheating of the economy.

The Governor, who is also Chairman of the MPC, said the bank’s consumer survey showed a generally positive assessment of macroeconomic conditions and prospects. The overall consumer confidence index increased to 102.1 in August from 99.5 in June.

On Government fiscal operations, Mr Amissah-Arthur said provisional data had shown that while revenue targets were achieved in the seven months to July, the pace of expenditure growth was higher than programmed.

Total revenue and grants for the first seven months of the year stood at GH¢5.8 billion while international trade taxes, comprising import duties, import VAT, petroleum taxes and National Health Insurance Levy fetched GH¢1.9 billion and indirect domestic taxes contributed GH¢679.2 million.

Total expenditure for the first seven months of the year stood at GH¢6.9 billion. Wages, salaries and related expenditures amounted to GH¢2.6 billion, absorbing close to 46.5 per cent of domestic revenues.

As a result, Mr Amissah-Arthur said, the fiscal operations from January to July resulted in a narrow budget deficit of GH¢1.12 billion compared with a target deficit of GH¢849.8 million.

Mr Amissah-Arthur said the deficit was financed by a net domestic borrowing of GH¢1.04 billion and a net foreign loan inflow of GH¢84.3 million.

He said as at end of July 2011, the domestic debt stood at GH¢10.9 billion, up from GH¢8.3 billion in December 2010 while the external debt stock rose to $7.1 billion from $6.3 billion within the same period.

This, Mr Amissah-Arthur said, brought the total public debt to GH¢21.6 billion as at the end of July this year, equivalent to 40.5 per cent of GDP, up from 38.1 per cent of GDP at the end of 2010.

Mr Amissah-Arthur said Gross International Reserves as at August 19 stood at $4.5 billion, representing 3.5 months of import cover.

The Governor said total merchandise exports during the seven months to July amounted to $7.5 billion, representing a growth of 62.3 per cent over the corresponding period in 2010, driven by oil, gold and cocoa beans.

Mr Amissah-Arthur said 12.6 million barrels of crude oil was exported during the first seven months of 2011 valued at $1.4 billion while exports of gold and cocoa beans amounted to $2.8 billion and $1.5 billion respectively.

On the other hand, total merchandise imports amounted to $8.6 billion during the first seven months, an increase of 45.4 per cent over the same period last year.

Mr Amissah-Arthur said crude oil imports went up to $825.9 million while imports of oil products were up to $805.8 million.