The Bank of Ghana (BoG) will from tomorrow begin its first assessment of the economy this year when its Monetary Policy Committee (MPC) starts its sitting.
Indications are that the policy rate which is among the highest in sub-Sahara Africa will be maintained to avert any further increases in the cost of doing business.
Lending rates are already high at about 32 per cent on the average whilst government keeps crowding the private sector out of access to credit. The 91-day and 182-day Treasury bill rates are hovering around 22.78 and 24.64 percent respectively.
Ecobank Research says it expects no change in the policy rate when the MPC chaired by Governor, Dr Henry Kofi Wampah meets tomorrow.
According to the renowned research institution, developments in the Ghanaian economy suggest the rate at which the Central Bank lends to commercial banks must be maintained.
Economist and financial analyst, John Gatsi also told Business Finder that the policy rate cannot be increased beyond a threshold hence the need to maintain it if not reduced.
“Looking at recent developments, it will be better if the policy rate is left at 26 percent, he explained.
“In the past, the Central Bank was using previous developments in determining the policy rate. Now they are using the forward approach which means the increases in utility tariffs and fuel prices have all been catered for already…..therefore the policy rate must at worst be maintained.”
The IMF in its second review of the economy lauded Ghana’s economy ongoing bailout programme, but expressed concern about risks. “Ghana’s economic outlook remains difficult with risks tilted to the downside,” according to the Washington lender.
The completion of the review will now allow the disbursement of another $114.6 million into the economy, bringing total disbursements under the arrangement to about $343.7 million.
It is expected that the Bank of Ghana will consider the second review of the Ghanaian economy by the Bretton Wood institution in its projection for the next quarter of 2016.
In its last MPC meeting, the Bank of Ghana said assessment of current economic conditions show that though monetary policy remains tight, some additional tightening is required to re-anchor the displaced inflation expectations. This, together with the on-going fiscal consolidation, is expected to break the high inflation inertia.
The committee added that “it will continue to monitor developments in the economy and take appropriate action if necessary, including the possibility of lowering the policy rate once inflation expectations are well-anchored.”
The Central Bank increased the policy rate by 500 basis points in the year 2015, one of the highest ever.
In Africa, Malawi is ranked first with the highest interest rate. The Reserve Bank of Malawi’s Monetary Policy Committee last increased the rate to 27 percent.
Whilst Nigeria has a policy rate of 11 percent, the Ivory Coast has interest rate of 3.50 percent.
Africa’s largest economy, South Africa has interest rate of 5.75 percent. Yields on short term securities are however between 5.9 and 5.98 percent respectively.;
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