The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has decided to maintain the policy rate at 16%, Dr Henry Kofi Akpenamawu Wampah, Governor of the Bank of Ghana, has disclosed.

In arriving at this decision, Dr Wampah said, the MPC took into consideration global economic developments and their impact on Ghana's economy, domestic economic developments such as inflation and growth, government fiscal operations, monetary and banking sector developments and external sector developments.

According to the Governor of the Bank of Ghana, developments in the external sector had continued to weigh on the domestic economy, despite improvement in the trade balance.

He said as a result of slackening growth in emerging market economies and the continued dip in commodity prices in international markets, coupled with the slow growth in the US economy, prospects for the global economy remained uncertain during the half year.

Dr Wampah who was addressing the media in Accra, yesterday, after the 56th meeting of the Monetary Policy Committee (MPC), said largely on account of the various policy measures implemented by the BoG, exchange rate pressures had moderated during the half year, relative to the same period last year.

He said it was expected that proceeds from the cocoa loan syndication and the Eurobond issue, amounting to a total of almost US$2.0 billion during the second half of the year, would shore up international reserves and further calm pressures in the foreign exchange markets.

He said although fiscal outcome on cash basis was within the budget target for the half year, the lingering fiscal pressures arising from the huge wage bill and outstanding commitments were of serious concern to the MPC.

The Governor of the Bank of Ghana said prospects for growth improved in the second quarter of the year as evidenced in the Bank's Composite Index of Economic Activity (CIEA), a rebound in consumer confidence and improved credit conditions.

Dr Wampah hinted of a gradual reduction in subsidies on utilities while improvement in energy supply and increased oil production were expected to support growth.

He said the MPC had taken cognisance of potential risks to growth including the continued softening of commodity prices on the world markets, the on-going fiscal consolidation as well as the worsening business expectations.

On inflation, Dr Wampah said in its assessment, the MPC identified upside risks such as potential pass-through effects of further petroleum price adjustments, possible adjustment of utility tariffs and pressures arising from the impending public sector wage settlement.

Source: ISD