crude oil price surges are worrying - BOG

Accra, July 25, GNA - Ghana has been incurring a monthly total of 900 million dollars, up from the previous 250 million dollars, ever since the increase in the world market prices of crude oil from the 45 dollars to 48 dollars per barrel to the current 58 dollars.

"This, no doubt will have a significant impact on the balance of payment situation of the country," Dr Paul Acquah, Governor of the Bank of Ghana (BoG), told the Ghana News Agency in an interview after the Monetary Policy Meeting in Accra on Monday that maintained the Prime Rate at 16.5 per cent.

The Governor noted that the crude oil prices were not expected to decline for the rest of the year given world demand conditions. "The surge in oil prices if sustained, would be a significant source of downside risk to the external payments, requiring flexibility in pricing and other efficiency measures to enforce economic resilience, Dr Acquah said.
Crude oil prices have settled between 58 dollars and 60 dollars per barrel after hitting 61.05 dollars in early June trading.
Dr Acquah explained that Ghana's half-year oil imports were currently pegged at 366.5 million dollars, 11.5 per cent above the level recorded for the first half of 2005, adding that, "the current account shows a deficit of 48.7 million dollars compared with a surplus of 59 .7 million dollars in the first half of last year."
Commenting on the foreign exchange market, total purchases and sales of foreign exchange by deposit money banks increased by 53.0 per cent. It moved to 2.9 billion dollars up from the previous 1.9 billion dollars over the total period for the total for the same period for 2004.
Gross international reserves, which reached a level of 1.73 billion dollars at the end of December 2004 was 1.47 billion dollars by June 2005. This, according to Dr Acquah, was equivalent to three months' imports of goods and services, with significant cocoa proceeds and donor disbursements still in prospect.
"The cedi exchange rate appreciated in nominal and real terms against the Pound and Euro while remaining stable against the dollar." He said between January and June this year, the cedi appreciated in nominal terms against the Euro by 11.6 per cent and the Pound 6.1 per cent while it virtually remained unchanged against the dollar.
"For the same period last year, the cedi depreciated by 2.2 per cent against the dollar and 7.5 per cent against the Pound while remaining stable against the Euro."
Dr Acquah said the trade-weighted real effective exchange rate for the cedi showed a real appreciation of 17.8 per cent by the cedi in the first six months of 2005, thus restoring the index close to its level in the first half of 2000.
He described the outlook as a period for consolidation on the path toward low stable inflation with relative exchange rate stability, providing a basis for increased GDP growth given the economic fundamentals and prudent fiscal and monetary framework supporting the 2005 policies.
Dr Acquah said the Government was running a deficit of 9,597.6 billion cedis on its expenditure at 14.0 per cent below the budgeted expenditure of 11,157.2 billion cedis but 25.0 per cent above January - May expenditure of 2004.
Recurrent expenditure of 6,020.9 was 12.2 per cent less than the budgeted level within the budgeted ceiling of 3,598.0 billion cedis for the first half of the year.
Expenditure on personal emoluments amounted to an estimated 2,899.5 billion cedis while capital expenditure recorded a shortfall of some 900.0 billion, amounting to 2,987.9 billion cedis for the first five months of the year.
Private inward remittances for the first five months of the year, Dr Acquah noted was 1,630.9 million dollars compared to the 1,0275 million for January to May last year.
Thirty per cent of the remittances amounting to 483.5 million dollars came from individuals.
Overall, Central Government budget recorded a deficit provisionally estimated to 1,512.5 billion cedis representing 1.56 per cent of GDP, compared with a programmed deficit of 772.1 billion cedis.
He said the domestic primary balance, however, recorded a surplus of 1,293.3 billion cedis, approximately 1.34 per cent of GDP, close to the budget target of 1,348.8 billion cedis 1.40 per cent of GDP. Net income financing of the budget amounted to 911.3 billion cedis in May and 1,250.9 billion cedis in June and compared with a programmed net domestic repayment of 237 billion cedis at end June 2005.
Dr Acquah explained that developments in the Consumer Price Index during the second quarter of the year indicated a decline in inflation with prices increasing at a much more slower pace than in the same period of 2004.
He said latest figures showed that the growth of the monetary aggregates had continued a slow down from the levels observed in the first quarter of 2005.
"At the end of June 2005, the growth of reserve money stood at 15.7 per cent, down from 35.4 per cent in June 2004 and 19.7 per cent in March 2005. Broad money supply growth similarly declined from 40.1 per cent in May 2004 to 23.0 per cent in May 2005 while money supply slowed from 38.4 per cent in May 2004 to 23.8 per cent in May of 2005." Foreign currency deposits in the banking the system, however, increased by 118 million dollars between May 2004 and 2005.