Prime rate drops to 24 per cent

Accra, Oct 11, GNA- The Bank of Ghana (BoG) has reduced the Prime Rate, the rate at which the central bank lends to commercial banks, from 26 per cent to 24 per cent for this month.

Briefing journalists in Accra on Friday, Dr Paul Acquah, Governor of the Bank said given the balance of risks it was most obvious that we have a reduction, adding that forward looking surveys indicate that inflation expectations are shifting downward.

He said this notwithstanding, there continues to be downside risks inherent in the world oil prices and exchange rate re-alignment pf the major international currencies.

"The economic outlook for the short to medium terms will continue to be driven by sustained implementation of the fiscal and monetary framework and a continuation of structural reforms to bolster productivity and output", he said.

Dr Acquah said the economic outlook was rather favourable with prospective seasonal increases, in cocoa exports given current private sector remittances.

The BoG Governor said gross international reserves have increased over the period from 880 million dollars in July to 1,012 million by the end of September 2003, the highest level in several decades. The figure he noted represents about 3.4 months of imports of goods and services compared to the projected position of 2.3 months of reserve cushion for this year.

Dr Acquah said the build up of international reserves has been driven by a combination of cyclically favourable terms of trade, savings from HIPC and firm implementation of fiscal monetary framework. He said the growth of monetary aggregates have continued to slow down with year-on-year growth in reserve money declining from 42.6 per cent in December last year to 32.4 per cent in September this year. "Similarly," he added, " broad money supply growth declined from 50.0 per cent in December 2002 to 39.5 per cent by July 2003."

He welcomed the continued downward path of interest rates on the money market, adding that the benchmark of 91-day treasury bill rate declined from some 34 per cent at the end of June to 25 per cent at end of September 2003 with the yield curve turning positive.

Dr Acquah was happy about the Cedi's performance and said the Cedi had remained relatively stable on the foreign exchange market and volatility has been reduced despite the spill over effects of the euro/dollar exchange rate movements on the international exchange rate market.

"On the interbank market, the cedi has depreciated by 3.50 per cent against the dollar since the beginning of the year", he said.