1st IMF PCI review is in October, we need to show the same discipline in conducting monetary policy as we did with the ECF - Asiama tells MPC
The first PCI review in October approaches with its attendant accountability demands.
In the Bank of Ghana's Monetary Policy Committee's 132nd meeting on September 23, Governor Dr. Johnson Pandit Asiama announced the upcoming first IMF PCI review in October. He emphasized the need for disciplined monetary policy, drawing parallels to the successful conclusion of the External Credit Facility (ECF) in July. Asiama stated that the markets would closely monitor the behavior of monetary and fiscal policies for credibility.
The first PCI review will serve as an accountability measure, with the Committee required to address questions such as whether the current policy rate of 14 percent remains suitable to anchor inflation expectations and if any adjustments are necessary. Asiama noted that the global economy is currently dominated by the Middle East crisis, which has entered its seventh month.
He highlighted the uncertainty surrounding the crisis's trajectory and its potential impact on global growth and inflation. Asiama also discussed the deterioration of global growth forecasts, with the World Bank and the United Nations projecting a growth rate of 2.5 percent, significantly lower than the IMF's April estimate of 3.1 percent.
Global headline inflation has been rising due to increased energy and agricultural input prices. Central banks have paused or reversed their easing cycles, anticipating higher US interest rates. For Ghana, the global shock is double-edged, with higher gold prices supporting export earnings and reserve accumulation, while higher energy and fertiliser import costs could lead to increased transport, production, and consumer prices.
Asiama emphasized that domestic macroeconomic conditions remain stable and positive, with headline inflation at 5.0 percent in August, below the 8±2 percent band. The fiscal position is stronger than programmed, with a primary surplus above target, debt at 45 percent of GDP, and debt distress risk reassessed from high to moderate.
The banking sector is sound, liquid, and profitable. However, the external position, with gross international reserves falling to US$11.07 billion and the current account projected to record a deficit, requires careful management. Building net foreign assets remains a priority heading into the fourth quarter.
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