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General News
BoG increases prime rate at 13.5% 11/9/2007
Accra, Nov. 06, GNA - The Monetary Policy Committee (MPC) of the Central Bank on Tuesday increased the prime rate from 12.5 percent to 13.5 percent citing reasons such as rising food and fuel prices which posed threat of taming inflation.
Dr. Paul Acquah, Governor, Bank of Ghana and Chairman of the Committee who announced this on Tuesday said, "if the economic fundamentals of the country have not been strong, the economy will not have been that resilient and robust in terms of GPD growth," but explained that the balance of risks informed the decision.
He said the economy was resilient to the energy supply interruptions and load shedding and rising fuel prices associated with increases in oil prices on the international market but said strong fiscal discipline and monetary tightening were required.
Dr Acquah said the Bank''s Composite Index of Economic Activity (CIEA) picked up during the third quarter of 2007 rising from 15.2 points (5.10 percent) over the June 2007 level of 299.43 to 314.71 points in September.
He said individual components that underpinned this growth over the June 2007 were recorded in port activities, sales of key manufacturing companies, credit to the private sector, imports, tourists'' arrivals and domestic VAT collections.
The Governor however, added that, this was off-set by decreases in cement sales, employment and exports. Provisional data available for the third quarter of 2007, he said showed that from September 2006 to September 2007 banks'' credit to the private sector and public institutions has increased by 1,348.5 million Ghana cedis (59.9 percent) to 3,600.3 million Ghana cedis compared with an increase of 542.1 million Ghana Cedis (38.9 per cent) over the same period in 2006.
Dr Acquah said the private sector''s share in the credit was 77.5 per cent (1,045.4 million Ghana Cedis) mainly an account of the services sector which absorbed 29.1 percent of the credit flow, followed by electricity, gas and water (16.4 per cent) Miscellaneous (including personal loans and mortgage) 15.9 percent and import trade of 10.6 percent.
He said annual inflation adjusted credit over the same period was 44.4 percent higher compared with 17.9 percent in the corresponding period of 2006 noting that the growth in credit was funded mainly by deposits.
Dr Acquah said the oval developments in the banking system through September 2007 showed a strong assets growth of 56.2 per cent to 7,114.1 million Ghana Cedis (51.7 Percent of GDP) compared with 28.4 percent the same period in 2006 (39.6 percent of GDP).
He said the average base rate quotations of the banks remained generally unchanged at 19.36 percent by the end of the third quarter within the range of 18.000 and 21.45 after it was revised downwards by 1.41 basis points in the first quarter. Similarly, he said lending rate of banks remained unchanged within the range of 15.0 percent and 33.5 percent in the year through September 2007.
He said the quality of the banking industry''s loan portfolio remained strong with Non Performing Loans (NPL) declining from 7.0 percent at the end of June 2007 to 6.1 percent in September.
In the year-on-year terms, Mr Acquah said provisional data indicated that broad money (M2+) grew by 33.6 percent to 4962.6 million Ghana cedis at the end of September this year.
He said foreign exchange component of broad money of it increasing by 30.0 percent to the equivalent of 1,124.9 million dollars at the end of September and accounted for 21.1 percent.
The Governor said of the 638.3 million Ghana Cedis total budget deficit recorded in 2007, 426.2 million Ghana Cedis was financed through domestic borrowing and 211.5 million Ghana cedis foreign sources including 70 million Ghana Cedis from HIPC debt relief.
He said total public domestic debt at the end of September stood at 3,588.9 billion Ghana Cedis, an increase OF 57.9 percent over the stock position at the same period in 2006.
On the balance of payment position, Dr. Acquah said a deficit of 197.73 million dollars was recorded during the quarter compared with a surplus of 210.81 million dollars during the second quarter. He said private inward transfers from January to September was 4.78 billion dollars which represented 13.4 percent increase over those for the corresponding period in 2006.
At the financial exchange front, the Governor said transactions by banks and forex bureaux over the first three quarters of 2007 amounted to 6.22 billion dollars, which 29.0 percent increase over purchases and sales over the same period in 2006.


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