Accra, Ghana – On May 22, 2023, the Monetary Policy Committee (MPC) of the Bank of Ghana announced its decision to keep the policy rate unchanged at 29.5 percent. Dr. Ernest Addison, the Governor of the Central Bank, highlighted the easing inflationary pressures observed since the previous MPC meeting in March 2023, including consecutive declines in headline inflation.
During a press briefing after the 112th MPC meeting held from May 17th to May 19th, 2023, Dr. Addison discussed various macroeconomic issues, such as the impact of the Domestic Debt Exchange, recent economic developments, and the outlook for inflation and growth.
He noted a further deceleration in headline inflation, which dropped to 45.0 percent in March 2023 and then to 41.2 percent in April 2023. The decrease in inflation can be attributed to tight monetary policy measures, a relatively stable exchange rate, and declining international crude oil prices, which have led to downward adjustments in ex-pump petroleum prices.
The Governor also highlighted declines in year-to-date headline inflation (12.9 percent), non-food inflation (14.5 percent), and food inflation (11.1 percent). Additionally, the Bank’s core measure of inflation has declined for the fourth consecutive month, signaling easing underlying inflationary pressures.
Private sector credit growth has slowed in line with the tight monetary policy stance, as well as banks’ portfolio adjustments following the domestic debt exchange and moderation in economic activity. Nominal growth in private sector credit eased to 19.8 percent in April 2023 compared to 26.5 percent in April 2022. In real terms, private sector credit contracted by 15.2 percent during the same period.
Dr. Addison highlighted that while most banks maintained Capital Adequacy Ratios above the regulatory minimum, the 2022 audited financial statements showed some impairments in capital levels. This was attributed to the temporary regulatory reliefs provided to cushion banks against the impact of the Domestic Debt Exchange Programme, similar to measures taken during the onset of the pandemic.
The Governor also discussed export earnings, noting a 3.6 percent year-on-year decline in total export earnings to $5.6 billion from January to April 2023. Lower crude oil exports and, to a lesser extent, non-traditional exports contributed to the decrease. However, gold exports increased by 15.9 percent, driven by higher export volumes, and cocoa beans exports rose by 30.3 percent due to increased production.
The gross international reserves at the end of March 2023 stood at $5.1 billion, equivalent to 2.4 months of import cover. Excluding encumbered and pledged assets, the reserves totaled $1.4 billion, with net international reserves at $2.1 billion. With the approval of the IMF-supported program and the receipt of the first tranche of disbursement, the reserves increased to $5.7 billion as of May 19, 2023, equivalent to 2.6 months of import cover.
The Bank of Ghana’s decision to maintain the policy rate at 29.5 percent reflects its commitment to supporting a stable inflationary environment and ensuring the overall economic stability of Ghana.