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Key Outcomes From Bank of Ghana’s Monetary Policy Committee Meeting

According to the BoG, international fiscal activities in 2023 exceeded expectations. This was achieved primarily because of intense economic activities in the United States, China, and other large developing economies across the globe, with a revamp in the global manufacturing industry

The Bank of Ghana has revealed the outcomes of its Monetary Policy Committee meeting held last week on the country’s foreign and domestic macroeconomic developments.

In a press release dated March 25, the bank shared some key decisions it made during the meeting including those concerning policy rates for the days ahead.

We bring you some key outcomes from the report:

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  • According to the BoG, international fiscal activities in 2023 exceeded expectations. This was achieved primarily because of intense economic activities in the United States, China, and other large developing economies across the globe, with a revamp in the global manufacturing industry. However, the BoG has warned of a possible bleak future because of uncertain geopolitical instability across the Middle East.
  • Dim developments in the Middle East – the Red Sea attacks coupled with OPEC cuts have also crippled delivery periods and stifled shipping costs, which has subsequently increased local prices of oil.

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  • Locally, the BOG indicated that Ghana’s fiscal activity, like the global market, exceeded expectations in 2023. Supported by a GDP growth of 2.9 percentage points in contrast to the projected target of 2.3 percentage points in 2023. This was largely due to the voluminous capacity of the service and agricultural sectors; the former, constituting in greater part by activities in the information & communication, transportation, and storage industries, contributed a whooping 2.3 percentage points, while the latter, constituted greatly by the livestock and crop industries, contributed 0.9 percentage points.
  • The Cocoa sector, however as big as it is, retrogressed steadily and contributed to a negative growth of 0.4 percentage points in 2023. Along with oil production declining, electricity consumption also declined while commodities under non-oil production appreciated by 3.3 percentage points.
  • In addition, private sector growth as at ending of February 2024, was 5.1 percentage points, a rather sharp decline from the 29.5 percentage points recorded in February 2023.
  • While the 91-day and 182-day treasury bills declined from 35.67 and 35.73 percentage points to 27.87 and 30.34 percentage points respectively.
  • The BoG noted that, despite being hit strongly by the exchange rate, certain policy cuts in the US coupled with our fiscal discipline and cash from the World Bank are expected to cushion the Cedi against the Dollar subsequently.
  • The release also shows that our risk to inflation is on the upscale, partly due to the sharp increment experienced in the first two months of the year.
  • As part of the policy regulations, BoG has directed that Banks with a Loan to Deposit ratio above 55% will have to meet the Cash Reserve Ratio of 15% – the value of their deposits as reserves. In addition, those with Loan to Deposit ratios below 40% will need to have at least 25% of the Cash Reserve Ratio (CRR). In simple terms, as explained by X user, @jerome, “The BoG is simply asking banks to increase the value of loans they are making if they don’t want to be forced to keep cash lying down and not earning any returns. The message is either you take more risks or your ability to park cash in t-bills will be reduced,” he said.

Among many other key recommendations, the Bank of Ghana (BoG) has maintained the monetary policy rate at 29.0 percentage points. All policy recommendations are bound to take effect from April 2024.

READ THE ENTIRE PRESS RELEASE BELOW

MPC Press Release March 2024

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