Stephen Odoi-Larbi
29 October 2008
With high expectations from the general public for the Central Bank to tighten its monetary policy in order to positively position the country against the global economic turmoil which has affected major economies in Europe and America, the Bank of Ghana has maintained its prime rate at 17%.
The Central Bank's (BoG) stand on maintaining the Prime Rate was at the backdrop of how the Ghanaian economy has proved resilient against the global economic meltdown which has resulted in many businesses folding up, whilst others have entered into a forced merger in order to withstand the shock.
The prime rate is the interest rate that Commercial banks charge their most credit-worthy customers. Generally, a bank's best customers consist of large corporations.
The Governor of the Bank of Ghana, Dr. Paul Acquah announced this on Tuesday in Accra, when he addressed a group of media practitioners over the state of the economy in its third quarterly report.
The announcement has thus sent relief and boosted investor confidence in the country.
A recent outlook (World Economic Outlook) by the International Monetary Fund (IMF) released this month, stressed that the main challenges in sub-Saharan African countries is how to respond to the large commodity price stock and the threat of slowing capital inflows.
It further said oil-importing countries, where the negative terms-of-trade shock has weakened fiscal and external positions, need to adjust their monetary, fiscal and income policies, where delay in the adjustment would put at risk not only macroeconomic stability but also recent achievements in improving policy and institutional framework which have been largely responsible for sub-Saharan Africa's impressive growth performance in recent years.
But Dr. Acquah believed that the Central Bank's survey on the economy against the turmoil in international markets had showed little effect on the Ghanaian economy, an indication that the economy was able to withstand the shock.
"We have reviewed the possible channels of transmission of the crisis to the domestic environment. From our assessment of the recent performance of the economy, the effect of the turmoil has so far been limited", he noted.
According to Dr. Acquah, the country's accounts in foreign banks are with reputable financial institutions and that the banking industry's low net open position (a measure of foreign exchange risk) indicates that the banking system in the country is not over exposed.
"All these mean that the resilience of the economy to effects of the fallout of the financial market turmoil appears robust", he added.
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