Bank of Ghana keeps policy rate unchanged at 13.5%

•The central bank of Ghana has decided to keep its monetary policy rate unchanged at 13.5%

•The bank cited an increase in the public debt stock and inflation as its reasons

•It added that its decision was influenced by threats of a third wave of COVID-19 infections which is likely to impact on economic recovery and outlook

The Bank of Ghana’s Monetary Policy Committee has kept its policy rate unchanged at 13.5% citing an increase in public debt stock and inflation.

This comes after the Committee concluded its scheduled meetings from July 21 to July 23 to review economic developments of the country.

A statement issued by the central bank on Monday July 26, 2021, explained the decision was influenced by threats to the current economic recovery and outlook as a result of a third wave of COVID-19 infections.

The BoG’s MPC added it was also concerned with regard to revenue under performance and government exceeding the budget deficit for the first five months of 2021.

“With public debt hitting 76.6 percent of GDP in May 2021, largely underpinned by revenue underperformance, it calls for a monetary policy response that will signal to the market that government is still committed to ensuring fiscal consolidation.”

“And again, with an uptick in inflation to 7.8 percent in June from 7.5 percent the previous month, there is the need for further caution, especially, given pressure emanating from the fiscal side. Hence, the decision not to further cut the rate after it did so by a 100-basis points last month.”

“The level of public debt raises debt sustainability concerns and the Committee reiterated the importance and urgency of fiscal consolidation efforts. Greater efficiency in debt management would be required, especially in the face of potential further tightening of global financing conditions which could heighten rollover risks and access to new financing in the outlook. This calls for strong vigilance and complementarity in fiscal and monetary policies to signal to the markets a strong commitment to consolidation.”

“Headline inflation has eased sharply and reverted within the medium-term target band, driven mainly by the tight monetary policy stance and some base drift effects. The latest forecast remains broadly unchanged with inflation projected to remain within band and around the central path in the forecast horizon barring any upside risks from fiscal pressures. On the whole, the Committee assessed that the risks to inflation and growth were broadly balanced and decided to keep the policy rate at 13.5 percent,” the central banks statement read.