International Reserves Hit $1.64 billion
Accra, Sept. 12, GNA - The Monetary Policy Committee (MPC) of the Central Bank has reduced its Prime Rate from 16.5 per cent to 15.5 per cent following macroeconmic consolidation in providing a solid basis for achieving single inflation and GDP growth targets for 2005. Briefing journalists in Accra after the meeting of the MPC, which ended on Friday, Dr. Paul Aqcuah, Governor of Bank of Ghana described the outlook for the economy as bright and positive with growth targets for 2005 within range given prudent implementation of the fiscal and monetary framework and the supporting policies.

He said developments on key economic indicators over the last three quarters, ending in September, show the consolidation of macroeconomic stability, with downward pressure on inflation and interest rates. He gave the exchange rate as having stabilized in a relatively liquid foreign exchange market, adding that preliminary results on the execution of the budget indicate continued reduction in the fiscal deficit and debt to GDP ratio, easing the pressure on the domestic money market.

Dr Acquah noted that, while the stock market remains bearish, economic activity remains on trend, business confidence generally optimistic, firming up after some softening in the first quarter. He was however, pessimistic about the effect of surging oil prices in the range of 60 to 70 dollars, saying it was offering a major downside risk.

The governor said a sustained surge in prices would be a significant source of pressure on the external payments position and domestic price inflation and a withdrawal of stimulus of growth. He explained that government was very concerned about the current price trend, adding that, "if it persists, we need to find ways of coping with the shock.

"It would however, be untimely to anticipate that prices will go to 100 dollars and thus adjust your framework prematurely."

On the international foreign exchange market, total purchases and sales of foreign exchange by deposit money banks amounted to 3.9 billion dollars by August 2005 and this compares with the 2.6 billion for the same period in 2004. This represents an increase of some 48.0 per cent in the depth of the market.

Gross international reserves, Dr Acquah indicated, hit 1.64 billion dollars at the beginning of September 2005, significantly above the 2004 level of 1.35 billion dollars for the same period.

"Gross international reserves position at the beginning of September 2005 is equivalent to some 3.2 months of imports of goods and services, with significant cocoa proceeds still in prospect in the fourth quarter," Dr Acquah added.

The cedi exchange rate continued its nominal and real appreciation against the pound and euro, while remaining stable against the dollar. The Governor explained that between January and August this year, the cedi appreciated in nominal terms against the Euro (10.3) and the Pound (6.6 per cent) while it traded within a tight range, ending virtually unchanged against the dollar at end of the period. For the same period, January to August in 2004, the cedi depreciated by 2.2 per cent against the dollar and 5.5 per cent against the Pound and ended virtually unchanged against the Euro.

The trade-weighted real effective exchange rate for the cedi showed a real appreciation of the cedi by 17.0 per cent in the first seven months of 2005, restoring the index and competitiveness of the economy close to its level in January 2002.

Private inward remittances was a record high of 2.535 billion dollars for January to July, 2005 compared to 1.51 billion for the same period in 2004.

"This is a 55.6 percent increase above the previous year's level which had 28.5 per cent notably 666.2 million dollars coming from individuals," Dr Acquah noted.

He said the Bank of Ghana survey on business confidence indicates that business sentiments about their own prospects and those of the economy in 2005 remain generally optimistic with the bank's composite indicator on economic activity registering a year-on-year growth of 17.30 per cent, easing from the 22.3 per cent for the same period in 2004.

Dr Acquah said business sector confidence had increased after some softening in the second quarter, while consumer confidence has increased for the sixth consecutive month since February 2005. Sept. 12 05