BoG maintains 13.5 percent Prime

Accra, Jan 28, GNA - The Monetary Policy Committee (MPC) of Bank of Ghana has maintained the existing 13.5 percent Prime Rate, citing factors such as rising commodity prices and inflation outlook. Announcing this at a press conference on Monday after a quarterly review of the economy by the MPC, Dr Paul Acquah, Governor of the Central Bank, said Ghana's economy was robust and resilient despite rising crude oil price that peaked to 100 dollars which translated into increases in domestic prices.

"The disinflation process experienced during the first to third quarter of the year came under stress in the fourth of 2007 due to cost price pressures from oil imports and some corrective tariffs adjustments in the energy sector, food, fiscal stimulus," he said. Dr Acquah said an upturn in core inflation accompanied the robust Gross Domestic Product (GDP) growth that called for tightening of monetary policy to secure the attainment of low and stable inflation within the single digit range in the 18 months horizon set by the Bank. "Inflation outlook in the coming months would be shaped by several factors including the alignment of Government budget for 2008," he said. Headline inflation rose to 12.7 per cent in December 2007 for the third consecutive month after declining to 10.2 per cent in September that year.

The BOG's measure of core inflation defined to exclude energy and utility items, also increased to 9.4 per cent in December from 8.2 per cent at the end of September 2007. Again, the underlining factors for the rise in the two inflation measures were the rising oil, food and utility prices. Dr Acquah said the Bank's Composite Index of Economic Activity rose by 20.1 per cent driven by exports, electricity consumption, Deposit Money, banks' credit to the private sector, increased tourists arrivals, cement sales, and Value Added Tax collections. At the real sector level, he said indicators showed that the economic base of the country was expanding relatively rapidly. Income and corporate tax collections grew by 22.4 per cent in 2007. Dr Acquah said workers' contribution to social security recorded a growth of over 45 percent with retail sales index increasing by 37 per cent.

He said 2007 saw 8,558 jobs being created against total recorded lay-offs of 2,783 for the year. This compares with 8,607 jobs that were created in 2006 with a lay-off figure of 5,059 the previous year. Dr Acquah said consumer confidence in the economy was high, despite a slight dip shown in the Bank's survey of Business and Consumer Confidence. On the exchange market, he said the Ghana Cedi depreciated cumulatively against the three major currencies; dollar, pound sterling and euro; by 5.0, 6.9 and 17.5 percents respectively. Overall Balance of Payment (BoP) recorded a surplus of 413.11 million dollars mainly on the account of capital inflows, including proceeds from issue of the debut severing bond on the international capital markets.

This is compared with a similar surplus of 415.12 million dollars for 2006. Of the 6.9 billion dollars total transfer recorded for 2007 indicating a growth of 19.3 per cent over the previous year, 1.7 billion dollars was received by individuals.

The country's gross international reserve stood at about 2.8 billion dollars including the 750 million-dollars government sovereign bond issued in the year translating about 3.1 months import cover. Total public debt dipped slightly from 50.9 percent of GDP in 2006 to 48.4 percent of GDP in 2007.