Despite inflation trending downwards, the Monetary Policy Committee (MPC) of the Bank of Ghana, has for the third consecutive time, maintained the monetary policy rate at 14.5 percent, citing widening fiscal policy as the main concern.
Headline inflation, after peaking at 11.4
However, data from the Bank of Ghana on budget execution for the first seven months has shown an overall budget deficit of 7.4 percent of GDP, against the revised target of 7.2 percent of GDP, indicating the impact that COVID-19 pandemic continues to have on fiscal operations.
So even though inflation has begun falling, showing a somewhat improved outlook, the MPC says the fiscal figures pose heightened risk to macroeconomic stability, hence requires a cautious approach to be taken in easing the policy rate.
“Fiscal policy has been a source of considerable stimulus, driven by exceptional expenditures directed towards goods & services, capital expenditures, COVID-related spending, and in the energy sector. As at July 2020, the budget deficit was higher than programmed. Indications from banking data point to a faster budgetary execution in August relative to the annual target of 11.4 percent of GDP, supported by exceptional domestic and foreign financing sources.
Source: https://thebftonline.com/29/09/2020/bog-keeps-policy-rate-over-fiscal-threat/
