BoG maintains Policy Rate at 27% for November 2024

The Bank of Ghana’s Monetary Policy Committee (MPC) has announced its decision to maintain the Monetary Policy Rate (MPR) at 27 percent following its latest meeting.

The decision was informed by an assessment of both global and domestic economic conditions, according to the central bank.

From the report, global economic activity remains resilient, supported by a recovery in real incomes and ongoing disinflation. The easing of monetary policies by central banks in advanced economies has bolstered growth, particularly in the services sector, although manufacturing activity has slowed. The Bank of Ghana noted that risks to the global outlook persist, including the lagged effects of previous policy tightening, geopolitical tensions, and the resurgence of trade protectionism. Global inflation has moderated, aided by declining energy prices and lower labour cost pressures. However, financial conditions remain tight despite recent policy rate cuts by central banks such as the Federal Reserve and the European Central Bank, which continue to signal a restrictive monetary policy stance to sustain the disinflation process.

On the domestic front, the BoG indicated that Ghana’s economy is showing continued recovery. According to the report, the Composite Index of Economic Activity recorded an annual growth of 2.2 percent in September 2024, compared to a contraction of 0.4 percent in the same period last year. This growth is attributed to increased port activity, household and business spending, construction activities, private sector credit expansion, and higher tourist arrivals. Business confidence has also improved, with firms expressing optimism about short-term prospects, while the Ghana Purchasing Managers’ Index (PMI) rose to 50.6 in October 2024, signalling an improvement in business conditions.

The BoG noted that inflation remains a concern, with headline inflation rising to 22.1 percent in October 2024 from 20.4 percent in August. The increase was primarily driven by food price pressures and the lingering effects of earlier currency depreciation. Despite this, inflationary pressures have eased significantly compared to October 2023, when the rate was 35.1 percent. Core inflation, which excludes volatile items such as energy and utilities, also declined to 21.4 percent in October 2024 from 36.2 percent a year earlier. Additionally, short-term interest rates have declined, with Treasury bill rates reflecting the impact of the monetary policy stance.

According to the Bank of Ghana, the stock market has performed strongly, with market capitalisation increasing to GH¢100.1 billion as of October 2024, up from GH¢73.9 billion a year earlier. This improvement is attributed to renewed investor confidence, particularly in the mining, IT, and finance sectors, as well as new share issuances by banks to restore capital levels.

The BoG highlighted that the banking sector remains sound despite elevated non-performing loans (NPLs), which rose to 22.7 percent in October 2024 from 18.3 percent a year ago. Total assets in the banking sector grew by 42.4 percent, while private sector credit rebounded with a growth rate of 28.8 percent in October 2024, compared to a contraction in the same period last year.

The report further noted a significant improvement in Ghana’s external sector position. The current account surplus rose to $2.2 billion in the first nine months of 2024, up from $912 million in the corresponding period of 2023. This was supported by increased gold and crude oil exports and robust remittance inflows. Foreign reserves have also increased to $7.92 billion, equivalent to 3.5 months of import cover, boosting confidence in the foreign exchange market and contributing to recent appreciations of the Ghana cedi against major currencies.

The Bank of Ghana emphasised the importance of monitoring global conditions, particularly the strength of the U.S. economy, geopolitical risks, and potential surges in global energy and food prices.

Domestically, the implementation of Ghana’s IMF program remains on track, with a positive assessment expected to result in an additional disbursement of $360 million in December. The BoG noted that this would further support macroeconomic stability.