The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has decided to increase the policy rate by 100 basis points to 19 per cent to contain inflation pressures and realign interest rates in favour of domestic assets.
Dr Henry Kofi Akpenamawu Wampah, Governor, BoG, who made this known at a news conference in Accra on Wednesday, after the 60th meeting of the Monetary Policy Committee (MPC) of the BoG, said the decision to increase the policy rate was in addition to the measures implemented in the previous MPC meeting on reserve requirements and NOPs which were still working through the system.
Dr Wampah gave the assurance that notwithstanding the moderation in economic growth, expectations remained positive as high private sector credit growth, improved cocoa production and expected addition of gas to the economy would be providing some boost to growth conditions in the latter part of 2014 and beyond.
He said the onset of gas production in the fourth quarter of the year was expected to reduce the oil import bill and to help restore the gross international reserves to a minimum of 3 months of import cover.
In addition, he said, the coming on stream of the new oil and gas fields in the second half of 2016 was also expected to consolidate the medium term outlook of Ghana's economy. Dr Wampah said in an effort to deal with exchange rate pressures, the BoG anticipated that proceeds from the cocoa syndicated loan and the Eurobond issuance, estimated at almost US$3 billion, would provide significant support for the market in the second half of the year.
He said fiscal consolidation would require a more aggressive stance in the second half of 2014, adding that government would have to continue to enhance revenue measures and rationalise expenditures to achieve the fiscal deficit target of 8.5 per cent of GDP for the year.
He said while some of these measures would address the short term challenges, there was also the need to continue to put in place medium term policies that would broaden the export base to reduce over reliance on a few primary export commodities. Dr Wampah, therefore, urged government to expedite action on the on-going policy to promote specific exports and import substitutes.
Source: ISD (G.D. Zaney)