JULY MONETARY POLICY MEETING BANK OF GHANA – A REVIEW (PART 1)

LAST WEEKEND, THE MONETARY POLICY COMMITTEE OF THE BANK OF GHANA HELD ITS JULY MEETING.FOLLOWING IS A BRIEF REVIEW OF THE MEETING, TOGETHER WITH AN OVERVIEW OF THE CURRENT ECONOMIC AND FINANCIAL DATA. BECAUSE  OF THE LENGTH OF THE ARTICLE, I WILL SEPARATE IT INTO THREE PARTS. THIS FIRST PART WILL COVER THE PRESS RELEASE OF THE MONETARY POLICY COMMITTEE, WHILE THE SECOND AND THE THIRD PART DEAL WTH THE SUMMARY OF ECONOMIC AND FINANCIAL DATA. YOU CAN DOWNLOAD BOTH DOCUMENTS AT THE END OF THIS ARTICLE, OR FROM http://www.bog.gov.gh

GLOBAL ECONOMIC OUTLOOK

THE PRESS RELEASE STARTS WITH A SHORT EVALUATION OF THE GLOBAL ECONOMIC SITUATION.. THE COMMITTEE MENTIONS THE GEOPOLITICAL RISKS LIKE THE TRADE WAR BETWEEN CHINA AND THE USA, AS WELL AS A LOOMING GENERAL GLOBAL ECONOMIC DOWNTURN. BUT THE COMMITTEE ALSO REALISES POSSIBLE POSITIVE ASPECTS FOR THE ECONOMY IN DEVELOPING COUNTRIES. THESE ASPECTS STEM FOR A TREND IN “DEVELOPED” COUNTRIES TO LOWER INTEREST RATES TO STIMULATE THEIR ECONOMIES. THIS TREND MIGHT LEAD TO INVESTORS PUTTING MORE MONEY INTO DEVELOPING ECONOMIES, WHERE THEY CAM OBTAIN HIGHER INTEREST RATES. BUT GENERALLY, THE COMMITTEE SEES MORE GLOBAL ECONOMIC RISKS THAN POSITIVE PROSPECTS FOR DEVELOPING COUNTRIES.

THE SITUATION IN GHANA

THE MONETARY POLICY COMMITTEE SEES THE DOMESTIC ECONOMIC SITUATION MAINLY POSITIVE. THIS OPINION IS TO A LARGE EXTENT BASED ON THE CONSOLIDATION OF THE FINANCIAL SECTOR (DO I SEE HERE A TAPPIMG ON THE OWN SHOULDER OF THE CENTRAL BANK?). I WILL ANALYSE ALL THE IMPORTANT FIGURES IN THE NEXT PARTS OF THIS ARTICLE. FOR NOW, I WILL LIMIT MYSELF TO THE LISTING OF SOME ISSUES THAT BACK THE POSITIVE OUTLOOK OF THE CENTRAL BANK:

1) DOMESTIC ECONOMIC ACTIVITY INCREASES;

2_GROWTH OF GDP IS SOUND, INCLUDED OIL AS WELL AS EX OIL;

3) THE SERVICES SECTOR SHOWS A STRONG GROWTH, COMPARED WITH 2018;

4) CONSUMER CONFIDENCE ADVANCES AFTER SOME MONTHS OF DECLINE (THE BUSINESS CONFIDENCE, HOWEVER, WENT DOWN A LITTLE);

5) INFLATION DECREASES IN THE LAST MONTHS, AND STRONGLLY REMAINS WITHIN THE CENTRAL BANK’S RANGE;

6) EXPORT RECEIPTS REMAIN STRONG AND CONTRIBUTED TO A TRADE SURPLUS;

7) IMPORT COVER INCREASES;

8) INCREASED DEMAND OF LOANS;

9) AS ALREADY MENTIONED, THE FINANCIAL SECTOR HAS CONSOLIDATED. THIS WE CAN SEE BEST IN THE INCREASE OF DEMAND FOR LOANS, THE INCREASE IN BANK’S ASSET QUALITY, AND THE LOWERING OF NON-PERFORMING LOANS.

COMPARED WITH THESE POINTS, THE NEGATIVE POINTS ARE FEWER – AND MOSTLY WEEL KNOWN. THERE IS FIRST OF ALL THE PROBLEM OF FISCAL STABILITY AND, INTEGRATED, THE MISSING OF REVENUE TARGETS. FURTHERMORE, THERE IS THE RISE OF PUBLIC DEBT STOCK, WHICH RESULTS IN A HIGHER DEBT/GDP RATIO (ALTHOUGH, IN MY OPINION, THE DEBT/GDP RANGE IS STILL WITHIN AN ACCEPTABLE RANGE).

CONSIDERING ALL THESE – AND MORE – POIMTS, THE CENTRAL BANK DECIDED TO KEEP THE MONETARY POLICY RATE AT 16%.

A BRIEF OPINION

I STRONGLY BELIEVE – AND I AM IN CONSENT WITH THE INTERNATIONAL MONETARY FUND (IMF) SO FAR – THESE ISSUES MUST BE ADDRESSED AS SOON AS POSSIBLE, IN ORDER TO AVOID THE SAME MESS THE PREVIOUS GOVERNMENT  FOUND ITSELF IN. GOVERNMENT MUST INCREASE THE TAX BASE TO INCLUDE THE INFORMAL SECTOR AS FAR AS IT IS POSSIBLE. MORE IMPORTANTLY, GOVERNMENT MUST FIND MEASURES TO FORCE THOSE WHO ARE ALREADY ELIGIBLE TO PAY TAXES TO EXERCISE THEIR DUTIES. IN THIS CONNECTION, FINDIND ADEQUATE SOLUTION IN INFORMATION AND COMMUNICATION TECHNOLOGY SHOULD NOT BE A PROBLEM.

IN REGARD OF THE INCREASE OF THE DEBT/GDP RATIO, IT ALWAYS DEPENDS ON WHAT THE DEBTS INCURRED ARE USED FOR. UNFORTUNATELY, STILL NOT ALL DEBTS WHICH CAME TO HAPPEN UNDER THE FORMER GOVERNMENT ARE PAID FOR. ON THE OTHER HAND, THAT SHOULD NOT GIVE THE CURRENT GOVERNMENT A SPACE FOR EXCUSE. AND FORTUNATELY, AS THE INCREASE OF ECONOMIC ACTIVITY HAS SHOWN, THE GOVERNMENT SEEMS TO HAVE LEARNT LESSONS FROM FORMER MISTAKES. LET US HOPE THAT THE INCREASE OF ECONOMIC ACTIVITY IS NOT ONLY A ONE-DAY-WONDER, BUT IT SEEMS THAT THE GOVERNMENT IS ON THE RIGHT PATH.

THE NEXT TWO PARTS OF THIS ARTICLE WILL DEAL WITH THE SUMMARY OF ECONOMIC AND FINANCIAL DATA. THEY WILL FOLLOW ON THURSDAY AND MONDAY.

MPC Press Release-July 2019     Summary_of_Economic_Financial_Data_July_2019

 

 

 

 

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