BoG Maintains Prime Rate

Business Page, October 29/2008

Story: Charles Benoni Okine

THE Bank of Ghana (BoG) has maintained the prime rate, the benchmark for banks to fix their interest rates at 17. 0 per cent.
The move, which brings to rest the growing anxiety by business people as to the next line of action from the central bank in the wake of the global economic turmoil, was based on the recent developments in the market, particularly crude oil and the risks to inflation and growth in the country.
The Governor of the BoG, Dr Paul Acquah, who announced this at a news conference in Accra yesterday, said credit to the private sector and public institutions continued at a rapid pace into the third quarter of the year.
“For the 12-month period to August 2008, credit to the private sector and public institutions increased by GH¢1.6 billion (46.6 per cent) compared with GH¢1.36 billion (64.4 per cent) recorded for the same period in 2007,” he said.
In real terms, the Governor said credit to the private sector grew at an annual rate of 33.4 per cent, some easing from 41.8 per cent, recorded at the end of 2007 and 43.9 per cent for the corresponding period in August 2007.
He said the latest credit conditions survey by the bank showed a general net tightening of credit conditions for enterprises with a shift in accommodation from corporate to small- and medium-scale enterprises (SMEs).
Evidence also continues to show that banks had increased availability of credit to households, but credit for house purchases tightened in the third quarter of the year, against the background of strong demand for credit by SMEs and households.
Dr Acquah said generally the strong performance of the economy reflected in the activities of the non-financial corporate sector.
He said financial data released by listed companies for the period ended September 2008 pointed to strong turnover and profits by companies in manufacturing, distribution and agricultural activities which were driven mainly by the cost of control measures and efficiency in operations and aggregate demand growth.
“On the execution of the 2008 budget, provisional banking data for the first nine months of 2008 show that revenue growth has been strong and in line with budget forecast and the pace of economic growth,” he said.
Dr Acquah said total revenue and grants for the period January to September this year amounted to GH¢3,451.5 million (21.1 per cent of GDP) compared with GH¢127.3 million (22.4 per cent of GDP) for the corresponding period in 2007.
“Of this amount, grants accounted for GH¢428.4 million (2.6 per cent of GDP) compared with the budgetary estimate of GH¢338.5 million and GH¢499.2 million (3.6 per cent of GDP) recorded for the same period,” he added.
He said gross international reserves position at the end of September 2008 was $2,270.2 million. This compares with $1,811.34 million recorded the same period last year and represents 2.3 months cover of imports of goods and services.
Dr Acquah said there was increased activity on the foreign exchange market as well as re-alignment of exchange rates during the third quarter of the year.
Total purchases and sales in the foreign exchange market by banks and forex bureaux between January and September 2008 amounted to $6.6 million (8.2 per cent over 2007 level).
On the stock exchange, he said total market capitalisation had increased significantly by 46.5 per cent, from GH¢5,751 million to GH¢18,120.7 million in the first nine months of the year and attributed this to price appreciation and right issues.