Accra: The Monetary Policy Committee (MPC) of the Bank of Ghana has maintained the policy rate at 27 percent, citing an elevated inflation profile largely driven by food price movements. The Committee said this also extended to the time horizon of achieving the medium-term target of 8±2 percent.
According to Ghana News Agency, Dr. Ernest Addison, the Governor of the Bank of Ghana, speaking at the 122nd MPC press briefing, noted that global economic conditions broadly improved in 2024. He mentioned that global inflationary pressures had gradually eased over the period, leading to easing monetary policy stances across several countries. Consequently, global financial conditions are expected to ease gradually as policy stances become more accommodative and inflation targets in Advanced Economies are met and expectations anchored.
He explained that these conditions are expected to result in improvements in investor sentiments towards emerging markets and developing economies. The Governor added that the international markets have priced in a much stronger US economy due to policies to be implemented by the new US administration, which has already instigated a stronger US dollar with implications for emerging markets and developing economies, including Ghana. He emphasized the need for complementary fiscal and monetary policies to prevent spillovers to the Ghanaian economy.
Dr. Addison stated that external sector conditions remained positive, with sustained and stronger-than-programmed rebuilding of reserve buffers contributing to the stability of the domestic currency. The performance of the external sector was mainly driven by strong growth in gold exports, which positively impacted growth. In the outlook, the external sector is expected to remain strong as commodity prices remain favorable amid improvements in production.
Overall, while the external sector conditions are expected to provide an anchor to exchange rate stability, key risks in the outlook, including challenges in the energy sector, will have to be closely monitored. The Governor highlighted that the stronger-than-projected growth and generally improved macroeconomic conditions are spilling over positively to the banking sector. To sustain this effort, the Bank of Ghana will continue to ensure that banks with capital gaps adhere to their committed recapitalization plans to shore up solvency.
He added that supervisory activities will be intensified to ensure that banks continue to address the high non-performing loans (NPLs), which pose potential risks to the stability of the industry. The improvement in domestic macroeconomic conditions is also expected to bolster debt servicing capabilities of corporate and household sectors, helping to mitigate further build-up of NPLs within the industry.
Dr. Addison concluded that the inflation profile remained elevated, largely driven by food price movements, especially in the last quarter of the year. Climate-related factors, including dry spells in some parts of the food-growing regions of the country and the late onset of rains, negatively affected production, while supply chain weaknesses generally affected food prices. He noted that while the inflation outturn for the year 2024 deviated from the target, it is expected that the disinflation process would resume, contingent on renewed efforts at fiscal consolidation anticipated in the new administration's economic policy agenda and the yet-to-be-presented 2025 budget statement.
