Bank of Ghana maintains policy rate at 29%

The Bank of Ghana (BoG) has opted to maintain its Monetary Policy Rate (MPR) at 29 percent, a decision made amidst cautionary advice from the International Monetary Fund (IMF) regarding the potential inflationary consequences of easing monetary policy.

This marks the first instance in 2024 that the BoG has chosen to hold the rate steady. Dr. Ernest Addison, the Governor of the Bank of Ghana, made this announcement during the 117th monetary policy briefing on Monday, March 25, 2024, emphasizing the importance of vigilant observation of current inflationary trends due to lingering risks.

Dr. Addison highlighted several key factors influencing the decision, stating, External sector conditions remain positive with improving reserve buffers. The exchange rate came under strong pressure in the first few months of the year. The banking sector remains stable despite the elevated credit rates.

He continued that most of the outstanding banks have met more than two-thirds of the required capitalization over a three-year period within one year as of the end of 2023. Fiscal policy implementation so far has been consistent with targets under the IMF support programme.

Banks' liquidity and profitability positions have continued to improve. Out of the total of 23 banks, more than half have fully capitalized and have no need for recapitalization, he added.

Speaking on fiscal policy, Dr. Addison noted that Although the primary fiscal balance target for 2023 was attained, the fiscal assessment is made on a commitment basis and vigilant to ensure commitment control is effective in 2024.

From 2023, the pace of inflation has slowed in the first two months of the year. The latest inflation forecast suggests a slightly elevated profile.

He indicated that the Bank of Ghana expects an early completion of recapitalisation efforts will lead to more resilience of the banking sector and position it to provide stronger support for real sector recovery.

He stated that the provisional balance of payments outcome for 2023 shows an overall surplus of US$0.46 billion compared to a deficit of US$3.41 billion in 2022. The development was driven mainly by lower income payments, lower outflows from the capital account and higher remittance inflows.

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