The Bank of Ghana has cut its monetary policy rate by 100 basis points to 17 percent, saying the risks to the inflation outlook are subdued in the forecast horizon.
Dr Ernest Addison, Governor of the Bank of Ghana, told a press conference on Monday that inflation was likely to fall to the bank’s target of eight percent by the end of this year or early 2019.
He was speaking after a meeting of the Monetary Policy Committee to review the macroeconomic situation against the background of developments in the global economy, assessment of the pace of economic growth, the execution of the 2018 budget and the outlook for inflation.
“There is evidence to show that some stabilisation and consolidation especially with respect to inflation and exchange rate expectations are taking hold. The fiscal and monetary policy mix and the corrective measures implemented to put the economy back on track are beginning to yield positive results,” Dr Addison said.
Annual inflation fell to 9.6 percent in April from 10.4 percent the month before.
Dr Addison said while global and domestic developments did not yet pose a threat to inflation in the near term, recent changes in global financing conditions and its impact on emerging market asset classes required some vigilance.
However, he said, the Monetary Policy Committee, stood ready to take the appropriate policy measures to address any potential threats to the disinflation path.
On fiscal operations, Dr Addison said the provisional March 2018 data indicates that budget execution was in line with programme, but there was the need for ramping up revenue mobilization to match the corresponding expenditure flows.
Provisional data for the first quarter of 2018 show that revenue and grants amounted to GH¢9.4 billion (3.9% of GDP), representing 86.6 percent of target while total expenditures amounted to GH¢12.9 billion (5.2% of GDP) and 94.3 percent of the target for the period.
These developments resulted in an overall cash deficit of 1.3 percent of GDP, in line with the target for the first quarter of 2018 and same for the corresponding period of 2017.
The total public debt declined from 69.8 percent of GDP (at the end of 2017 to 60.0 percent of GDP (GH¢145.0 billion) at the end of February 2018, reflecting a higher GDP base.
Dr Addison said the country’s public debt declined from 69.8 of gross domestic product at the end of 2017 to 60 percent at the end of February.
Of the total, domestic debt was GH¢68.2 billion 47 percent of total debt and external debt was GH¢76.8 billion 53 percent of total debt.
Dr Addison said provisional external trade balance for the first four months of 2018 was a surplus of US$1.1 billion, representing 2.2 percent of GDP reflecting higher export receipts, mainly from crude oil.
This compares with a surplus of US$1.2 billion 2.5 percent of GDP recorded over the same period in 2017.
The Gross International Reserves (GIR) position at the end of March 2018 was a drawdown of US$513.9 million in line with the projected cashflow for the period. However, the recent Eurobond issued has raised the level of international reserves to US$8.1 billion (4.4 months of import cover) as at 17th May, 2018, providing enough cushion against any potential external vulnerabilities.