THE Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has started its quarterly meeting to review the national economy.
The committee usually considers developments within the economy and reviews them against the backdrop of the international economy to which Ghana’s economy has both direct and indirect connections.

The behaviour of world market prices of primary commodities such as gold, cocoa and crude oil is of immense importance to the economy, which exports mainly primary commodities but imports everything from capital goods to consumables like toothpick.

The last time the committee met was in July after which it maintained the prime rate – the rate at which commercial banks borrow from the central bank – 18.50 per cent.

The prime rate serves as a benchmark rate for the charges of banks on their lending, influencing it more on the upward trajectory than the downward.

This is because banks easily adjust their interest rates upwards anytime there is an increase in the prime rate, than they will do when the rate is reduced.

The committee usually looks at core inflation behaviour, domestic receipts and payments (fiscal accounts) as well as foreign receipts and payments (the current account).

It will also look at the financial sector and trace the pattern of loans by the banks and also look at trends in inward remittances by embassies, NGOs and individuals into the country, among others.

Not much has happened since the MPC’s last meeting, except for fiscal consolidation and a general economic unwinding. This has been underpinned by foreign inflows from bilateral and multilateral development agencies, such as the $535 million from the World Bank for three years, of which $150 million is still expected in the last quarter of the year.

This has paved the way for the government to spend in productive areas of infrastructure, particularly roads, necessary for regeneration of economic activity.

The IMF also pledged to make available a total of $1 billion for the country to shore up its international reserves, a move that will strengthen the Ghana cedi.

The government has also set up the Treasury Single Account (TSA) to enable the government to manage its revenues better, reduce domestic borrowing and channel savings realised into development projects that will be beneficial to the people.

That notwithstanding there are signs of volatility associated with crude oil prices on the market, which also poses a major challenge for the government’s subsidisation programmes where GH¢1.52 million is spent monthly in subsidising electricity in the country.

Currently, the Tema Oil Refinery (TOR) is heavily indebted to  the Standard Chartered Bank and Ghana Commercial Bank, which is estimated at over GH¢1 billion.

However, food inflation has eased, coupled with the BoG’s maintenance of the prime rate at 18.50 per cent for two consecutive times has helped to check inflation, which has eased from the high of 20.74 in June to 19.65 per cent in August.

Although the BoG in the past adjusted the prime rate upwards in the last quarter to contain inflation associated with high economic activity, analysts who spoke to the Daily Graphic, have cautioned that the rate should be maintained else inflationary pressures would exacerbate.

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