Economist, Courage Martey says he believes the reduction in the policy rate will impact positively on the implementation of the government’s Ghana CARES “Obaatanpa” programme to help rebound the economy.
Speaking with Emmanuel Aboagye-Wiafe on the Asaase Business News, Martey said, “It is essentially good for the programme [Ghana CARES “Obaatanpa” programme] because you need businesses to access cheap credit to ensure that they support the programme to achieve its objective of stimulating growth. So the reduction is good for the programme.
He added, “On the other side if the implementation [the fiscal side] of implementing the policy leads to more borrowing; this borrowing can be had at a lesser cost because interest rates of the market should also follow downwards …”
Policy rate
The Monetary Policy Committee of the Bank of Ghana Monday (31 May) reduced the policy rate to 13.5% amid the coronavirus pandemic.
It was reduced by 100 basis points from 14.5% in March 2021.
Announcing the decision of the MPC, Governor of the Central Bank, Dr Ernest Addison said it took the decision based on the fiscal policy measures contained in the 2021 Budget Statement gearing towards economic growth.
He said, “On growth outlook, the Committee’s view was that projected growth in the extractive industries, steady rollout of the vaccination programme and recovery in industry and the services sectors should work their way in supporting a faster closure of the output gap in the medium-term.
“Headline inflation eased sharply to within the medium-term target band, driven mainly by lower food prices and base drift effects, a tight monetary policy stance and stable exchange rate conditions. Since the initial shock to inflation in April 2020, the forecast showed that inflation will be close to the central target by June 2021.
“These forecasts remain broadly unchanged and inflation would remain within the target band in the next quarter. Risks to the inflation outlook appear muted in the near-term, but pressures from mostly rents and transport fares, would require some monitoring to anchor inflation expectations,” Dr Addison added.
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