Prime Rate Still 15%

For the third consecutive time this year, the Bank of Ghana (BoG) has maintained the prime rate at 15 percent.

Since June 2012, the Central Bank has maintained the prime rate, which is the benchmark indicator that the Bank lends to universal banks.

Dr Henry Kofi Wampah, Chairman of the Monetary Policy Committee of the Bank of Ghana, at a press briefing yesterday disclosed that the decision was based on the fact that the risks to inflation and growth rate of the country were balanced.

The acting governor made the announcement while presenting highlights of the 53rd Monetary Policy Committee meeting which was the last for this year.

The meeting focused on the latest economic conditions and risks to the growth outlook of the country.

He stated that the committee observed an improvement in the economic trends in the third quarter of the year, which contrasts trends in the first half of the year.

On growth outlook, he said positive developments in the private sector, particularly in terms of credit expansion and improved credit conditions “are upside risks which could be moderated by the on-going energy sector challenges and global uncertainties.”

Dr Wampah stated that provisional estimates of real Gross Domestic Product (GDP) growth from the Ghana Statistical Service, for the second quarter was 2.5 per cent compared to 20.6 per cent for the same period of 2011 mainly due to base effects from the addition of oil.

Looking at the three main sectors of the economy, he said, industry, recorded the highest growth of 4.5 per cent, followed by services with 1.6 percent.

However, despite a 15 per cent growth in the crop sub sector, sharp decline in forestry, fishing and livestock made the agriculture sector to contract by 0.1 per cent.

He said, “Growth in the global economy remained constrained by persisting uncertainties in the Euro area, fragile financial markets and the looming US ‘fiscal cliff’ which involves automatic spending cuts and tax hikes early next year.”

This not withstanding, he observed that on the domestic front, exchange rate pressure, which threatened macroeconomic stability and heightened inflationary pressures during the first half of the year “had eased largely as a result of the policy measures implemented.”

In the past two months, he said, “We have observed some marginal appreciation of the cedi relative to the US dollar,” adding that the reduced volatility in the foreign exchange market has helped to lower inflation expectations in the near terms.

To preserve the economy against risks, he stated that fiscal consolidation “is crucial at this stage.”

He noted that the committee will continue to monitor the economic and financial developments and respond appropriately to preserve macroeconomic stability.