BY: Naa Anyema Collison
The Bank of Ghana’s Monetary Policy Committee (MPC) has maintained the policy rate at 13.5 per cent.
The Committee said this is because its assessment showed that the risks to inflation and growth were broadly balanced. The committee announced this in a press statement on Monday, 26 July 2021. The Monetary Policy Committee (MPC) of the Bank of Ghana has kept its key lending rate to commercial banks at 13.5%.
This is due to the third wave of Covid-19, high budget deficit because of revenue underperformance as well as the balance of risks to inflation and growth, among others.
The banking sector performance reflected sustained growth in customer deposits, investments, total assets, and profits and key financial soundness indicators remain healthy about liquidity and solvency. Based on macro-prudential risk assessments, the Committee expects the banking sector to withstand mild to moderate credit risk shocks although a new wave of the pandemic in Ghana could further elevate credit risks and would require close monitoring of banks’ capital and liquidity buffers”, it noted.
“On fiscal operations, the budget deficit exceeded its target in the first five months mainly on the back of revenue underperformance. Going forward, expenditure has to be aligned to revenue performance to support the fiscal consolidation efforts”, it pointed out.
In a similar trend, the average bank lending rates declined marginally to 20.6% in June 2021 from about 22.0% in the corresponding period of 2020.
Global financing conditions have tightened somewhat as prospects of strong growth and higher inflation expectations pushed up borrowing costs in advanced economies. However, the continued pursuit of accommodative monetary policy by major central banks has moderated sovereign and corporate bond spreads and so far, contained capital flow reversals, and supported the rebound in equity markets and higher portfolio flows to emerging market economies. In broad terms, financing conditions remain favourable and supportive of the recovery process.