100TH MEETING OF THE MPC OF THE BANK OF GHANA – MAY 2021

100th-MPC-Press-Release-May-2021

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Summary-of-Economic-and-Financial-Charts-May-2021

 

THE 100TH MEETING OF THE MPC OF THE BANK OF GHANA – MAY 2021 CAMEĀ  ON IN THE LAST WEEK OF MAY – CONGRATULATIONS!

IN MY ARTICLE, I WILL CONCENTRATE ON THE PRESS RELEASE BY THE MPC, AND LEAVE THE FINANCIAL DATA OUT. THIS IS BECAUSE THE PRESS RELEASE GIVES A GOOD SUMMARY OF THE DATA PROVIDED. ADDITIONALLY, THE BANK OF GHANA PUBLISHED CHARTS RELATED TO THE FINANCIAL DATA. AS USUAL, YOU CAN DOWNLOAD THE THREE DOCUMENTS AT THE BEGINNING OF THIS ARTICLE.

FOR THE START, I DEAL WITH THE RESULT:; THE BANK OF GHANA REDUCED THE MONETARY POLICY RATE BY 100 BASIC POINTS TO 13.5 PERCENT. THIS IS OBVIOUSLY BECAUSE THE BANK OF GHANA WANTS TO EASE THE BURDEN OF INVESTORS TO TAKE LOANS IN FACE OF A REVIVING ECONOMY. THEREFORE, THE BANK OF GHANA TRIES TO PUT A LITTLE PRESSURE ON THE COMMERCIAL BANKS. THEY ARE SUPPOSED TO PASS THE REDUCED RATE OVER TO THEIR CUSTOMERS, THE AVERAGE BANK LENDING RATE HAS ALREADY GONE DOWN IN THE LAST MONTHS. ON THE OTHER HAND, THIS REDUCTION IS SURELY NOT SUFFICIENT TO ACHIEVE THE DESIRED OUTCOME – AN INCREASED ECONOMIC ACTIVITY ON THE PART OF THE “ORDINARY GHANAIAN”.

AND WE CAN ASK THE BANKS TO DO SO, AS THE BANKING SECTOR APPEARS TO BE MANAGED VERY SUCCESSFULLY. ALL AVAILABLE DATA POINT TO A VERY HEALTHY BANKING SECTOR. SO PLEASE, BANKS, LET US PARTICIPATE IN YOUR HEALTH.

THIS SEEMS ESPECIALLY NECESSARY AS ONE OF THE FEW NEGATIVE ASPECTS OF THE CURRENT ECONOMIC DATA IS THE BUSINESS AND CONSUMER CONFIDENCE. BOTH HAVE DECREASED AMONG CONCERNS RELATED TO ELECTRICITY SUPPLY AND POSSIBLE TAX INCREASES. THE BANK OF GHANA TAKES THESE CONCERNS SERIOUSLY, BUT CONSIDERS THEM TEMPORARY. INDEED, PRICE INCREASES HAVE NEVER GONE BACK, AND AFTER SOME TIME, THE PUBLIC GETS USED TO NEW PRICES. THAT DOES NOT SOUND NICE, BUT IT IS THE TRUTH. AND IT IS THE SAME EVERYWHERE.

COMMODITY PRICES WERE MIXED. WHILE GOLD AND COCOA WENT DOWN, OIL WENT UP. GOLD WENT FOR THE MOST PART DOWN, BECAUSE WITH THE OPENING OF THE ECONOMIES, GOLD HAS TO PLAY LESS THE ROLE OF A “SAFE HAVEN”. COCOA MOSTLY WENT DOWN BECAUSE OF AN OVERSUPPLY FROM COTE D’IVOIRE.

ON THE OTHER HAND, OIL GAINED MOMENTUM BECAUSE OF THE OPENING OF THE ECONOMIES. ESPECIALLY CHINA IS IN DIRE NEED OF OIL. IT NEEDS THE “BLACK GOLD” FOR THE REVIVAL OF IT INDUSTRIES AFTER THE PANDEMIC.

BUT WE MUST BE CAREFUL WITH OUR JUDGMENT. THE TREND GOES MORE AND MORE TOWARDS NON-FOSSIL ENERGY. THEREFORE, THE DAYS OF OIL MIGHT SOON BE COUNTED.

THE MOST IMPORTANT PROBLEM IS STILL THE FISCAL SITUATION, ESPECIALLY UNDER COVID19. THE PANDEMIC MADE ALL GOVERNMENTS SPEND MORE THAN THEY ORIGINALLY WANTED. BUT DEVELOPING COUNTRIES SUFFER MOST UNDER THIS SITUATION. THE ONLY SOLUTION NOW WILL BE A PRUDENT FISCAL POLICY. SUCH A POLICY SHOULD INCLUDE LETTING MORE PEOPLE PAY TAXE. THERE ARE TOO MANY PEOPLE IN THIS COUNTRY WHO DO NOT PAY TAXES, ALTHOUGH THEY SHOULD DO SO.

WITH ALL THESE POSITIVE DEVELOPMENTS, AND UNDER RECOGNITION OF ALL THE RISKS CAUSED BY THE PANDEMIC AND OTHER CIRCUMSTANCES, THE BANK OF GHANA DECIDED TO REDUCE THE MONETARY POLICY RATE BY 100 BASIC POINTS TO 13.5 PERCENT. THIS BOLD STEP – AS ALREADY MENTIONED – SHOULD GIVE THE GHANAIAN ECONOMY A PUSH.

THE 100TH MEETING OF THE MPC OF THE BANK OF GHANA – MAY 2021 IS THEREFORE SUCCESSFULLY OVER. LET US HOPE THE SUGGESTIONS IT GAVE WORK. WE MUST ALL WORK TOGETHER TO DEVELOP THIS COUNTRY. LET’S DO IT!

 

 

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