BOG Leaves Interest Rate Unchanged

Accra, Oct. 28, GNA - Bank of Ghana has maintained its prime rate at 17 per cent, Dr Paul Acquah, Governor of the Bank announced on Tuesday.

Briefing the press after a meeting of the Monetary Policy Committee, Dr Acquah said with falling crude oil prices, the risks to growth and inflation were now more balanced.

The benchmark prime interest rate reached a three-year high

of 17 per cent in July after annual inflation rates increased to 18.4

per cent the previous month. Inflation has since been on the decline and stood at 17.9 per

cent in September. Dr Acquah said the reduction in oil prices was stabilising and

re-enforcing diminishing inflation expectations and predicted that

headline inflation was likely to end the year around 17 per cent

before returning close to 10 per cent in the last quarter of 2009. He said available information points to the economy

recording a real GDP growth rate of about 6.6 per cent in 2008,

before easing, according to forecast, to some 6.3 per cent in

2009. Touching on developments in the economy in the last nine

months, Dr Acquah said the strong pace in economic activity

showed significant growth in both exports and imports through

the first nine months of the year. Total merchandise exports at the end of September stood at

US$4,017.5 million, an average annual growth of 30.8 per cent. Exports of cocoa beans and products amounted to

US$1,160.9 million compared with US$910.8 million for the

same period in 2007, representing an increase of about 27.5 per

cent. Cumulative cocoa purchases for the 2007/08 season through

the end of September 2008 amounted to 758,908 tonnes, against

a forecast of 650,000 tonnes for the entire crop season. During the period gold exports amounted to US$1,751.0

million compared with US$1,247.4 million for the same period in

2007. Non-traditional exports saw a boost reaching US$716.9

million compared with US$586.7 million in 2007, On the other hand imports for the period amounted to

US$7,514.1 million, an annual growth of 31.3 per cent. Non-oil imports grew by 38.3 per cent on year on year basis

and amounted to US$5,807.2 million and accounted for 77.3 per

cent of total imports, compared with US$4,198.8 million for the

same period in 2007. Oil import bill for the first nine months of 2008 was

US$1,706.8 million, compared with US$1,523.9 million for the

same period in 2007. Dr Acquah said the overall balance recorded a deficit of

US$716.8 million in the nine months ending September up from

US$566.9 million for the same period in 2007. The deficit, Dr Acquah said, was financed mainly by

drawdown of reserves including the balances of sovereign bond

proceeds of US$750 million that accrued in the last quarter of

2007. "For the year as whole given the trends in current account

and capital inflows essentially seasonal credits associated with

cocoa exports, the overall balance of payments deficit is

projected at US$490 million compared to a surplus of US$413.1

million in 2007," he said. Gross international reserves position at the end of September

2008 was US$2,270.2 million. This compares with US$1,811.34

million in September 2007 and represents 2.3 months cover of

imports of goods and services. On the execution of the 2008 budget, Dr Acquah said

provisional banking data for the first nine months of 2008 show

that revenue growth had been strong and in line with budget

forecast and the pace of economic activity. Total revenue and grants for the period January to September

2008 amounted to GH¢3,451.5 million (21.1 per cent of GDP)

compared with GH¢3,127.3 million (22.4 per cent of GDP) for

the corresponding period in 2007. Of this amount, grants accounted for GH¢428.4 million (2.6

per cent of GDP) compared with the budgetary estimate of

GH¢338.5 million and GH¢499.2 million (3.6 per cent of GDP)

recorded for the same period in 2007. Total expenditure (excluding externally financed capital

expenditure) for the period amounted to GH¢4,782.5 million

(29.4 per cent of GDP) compared with GH¢3,382.0 million (24.2

per cent of GDP) in 2007. The Government budget recorded a narrow fiscal deficit

(excluding externally financed capital expenditure) of GH¢686.4

million (4.2 per cent of GDP) compared with GH¢293.6 million

(2.1 per cent of GDP) registered for the same period in 2007. The borrowing requirement of the narrow fiscal deficit of

GH¢686.4 million, and a net foreign loan repayment of some

GH¢278.9 million were mainly financed from the domestic

economy to the tune of GH¢547.6 million (3.4 per cent of GDP)

and GH¢471.8 million of the sovereign bond proceeds mainly to

cover investment in energy, Dr Acquah said. The stock of domestic debt (gross), which was GH¢3,708.2

million (26.5 per cent of GDP) at the end of 2007, increased to

GH¢4,144.8 million (25.4 per cent of GDP) in September 2008. External debt stood at US$4,030.0 million (28.1 per cent of

GDP) at the end of September 2008, up from US$3,590.4

million (24.9 per cent of GDP) at the end of December 2007,

with most of the increase (US$470.0 million) being on account

of multilateral and bilateral creditors. This brings total public debt at the end of September 2008 to

US$7,683.4 million (53.5 per cent of GDP), up from US$7,411.7

million (51.4 per cent of GDP) at end of the 2007, Dr Acquah

said.