BOG pursues tight monetary policy - report
Report attributes foreign exchange shortfall to low disbursement
House concludes debate on Development Credit Agreement
First quarterly review of economy before Parliament
BOG pursues tight monetary policy - report
Accra (Greater Accra) 2nd July ’99
A report on the review of the economy for the first quarter of 1999, indicates that the Bank of Ghana continued to pursue a tight monetary policy during the period.
This is line with the government's objective of attaining a single digit inflation rate by the end of this year.
The report, which was laid before Parliament on Wednesday, said as a result of the policy, the productive sectors of the economy benefited from adequate credit, even though reserve money fell as net foreign assets declined, broad money virtually remained unchanged.
It said in the quarter, broad money declined by 11.8 billion cedis or 0.3 per cent from 3,903.7 billion cedis.
Savings and time deposits increased by 16.1 billion cedis and foreign currency deposits by 38.5 billion cedis while currency outside the banks fell.
The report explained that the decline in broad money during the quarter was driven entirely by net foreign assets of the banking system, which fell by 318.3 billion cedis.
Net domestic assets on the other hand, increased by 306.5 billion cedis and was underpinned by increases of 222.4 billion cedis in net claims on government and 123.2 billion cedis in claims on the private sector and public enterprises.
The report said during the period under review, total outstanding credit, extended to the private sector and public institutions by the deposit money banks (DMBs), increased by 111.9 billion cedis or 6.6 per cent to 1,927.2 billion cedis.
It said the most significant increases occurred in credit to export trade (29.4 billion cedis), agriculture (24.2 billion cedis), service (21.4 billion cedis) and miscellaneous sector (18.5 billion cedis).
Credit for cocoa marketing declined by 19.5 billion cedis, mainly because of the repayment of a syndicated loan for the sector, the document said.
On interest rate, the report said in response to declining inflation, the Bank of Ghana reduced the bank rate in January by five percentage points from 37 per cent to 32 per cent.
It said money market rates also declined during the quarter, with the 91-day Treasury bill discount rate falling to 25.8 per cent from 26.8 per cent.
The report said the borrowing and the lending rates quoted by the DMBs showed mixed developments.
For borrowing rates, the savings deposit rates moved from range 8.0-25.0 per cent to 8.0-26.0 per cent.
Lending rates, on the other hand, changed from 30.0-48.0 per cent in December 1998 to 33.0-41.5 per cent at the end of March 1999.
The document reported a significant fall in the domestic inflation rate during the period under review and said this reflected the continued tightening of both fiscal and monetary policies and improved food supply.
It said the end-period inflation rate in March 1999 was 13.7 per cent, compared with 20.3 per cent over the same period last year, adding that for the first quarter alone, this represents a two-percentage point drop from 15.7 per cent at the end of December 1998.
The report indicated that domestic production of basic food items improved considerably.
It attributed this to the tightened fiscal and monetary policies, which it said helped to stabilise the exchange rate and thus contributing to the downward trend in the non-food inflation index over the 12 months' period.
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Report attributes foreign exchange shortfall to low disbursement
Accra (Greater Accra) 2nd July ’99
The 1999 first quarterly report on the review of the economy has attributed the shortfall in the country's foreign exchange receipts to low disbursement of funds.
The report, which was laid before Parliament on Wednesday, said total foreign exchange receipts by the Bank of Ghana during the period fell short of payments by 55.7 million dollars.
It noted that foreign exchange receipts, at 198.8 million dollars, was lower than projected.
The report said during the review period, total foreign exchange payments made by the Central Bank amounted to 254.5 million dollars, compared with the programmed payments of 262.1 million dollars.
It attributed the lower payments to low oil payments arising out of low world prices.
Loan repayments, on the other hand, were 104.9 million dollars.
The report said the net foreign assets of the Bank of Ghana declined to 98.5 million dollars at the end of the first quarter of 1999.
It said the decline resulted from a fall of 55.3 million dollars in the Central Bank's assets to a stock position of 452.4 million dollars and a decrease of 13.3 million dollars in liabilities to a stock position of 353.9 million dollars.
On external debt, the report said the country's indebtedness, including obligations to the International Monetary Fund (IMF), was estimated at 5,791 million dollars at the end of March, this year.
This stood at 44 million dollars lower than the position at the end of December last year.
The document said in the first quarter, debt service payments made through the Bank of Ghana, amounted to 115.2 million dollars, made up of 85.3 million dollars as principal and 29.9 million dollars as interest.
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House concludes debate on Development Credit Agreement
Accra (Greater Accra) 2nd July ’99
Parliament has concluded the debate on the motion for the adoption of the Report of the Finance Committee and recommended the approval of the Development Credit Agreement.
The agreement is between Ghana and the International Development Association (IDA) for an amount of 180 million dollars to finance the Economic Reform Support Operations (ERSO 2).
All the 51 members of the Majority side present voted in favour of the motion, while their 22 Minority counterparts voted against it.
The Minority indicated that even though they see nothing wrong with the agreement, the Ministry of Finance has failed to furnish them with "basic, vital, fundamental and adequate information" to enable them make informed, intelligent and meaningful contributions to the debate.
In his contribution to the debate, Dr Kofi Konadu Apraku, Minority Spokesman on Finance voiced out the opinion of the Minority when he said: "We are demanding clear guidelines upon which we can make informed decisions, and so we are not going to be part of this debate."
"Our obligation is only to the good people of this country, who we represent. We want to analyse critically everything that comes to us, and so we cannot be rushed into approving the loan because it is coming from the Ministry of Finance," he declared.
Mr Albert Kan-Dapaah, Minority Spokesman on Mines and Energy, said it is the conviction of the Minority that loans contracted will help consolidate the macro-economic gains so far achieved by the government under the Economic Recovery Programme (ERP).
He stated that the Committee on Finance itself, after noticing the lack of information, urged the various sector ministries to find time to brief their respective Parliamentary Select committees on reforms going on in their ministries.
Mr Kan-Dapaah said the Minority wondered why the committee should this time round turn back and urge the House to approve the loan.
"How can we approve a loan with doubts in our minds?" he queried, adding that that will amount to rubber-stamping.
Mr Kan-Dapaah described the loan conditionalities as "outrageous" citing government's decision to allow private licensing cocoa companies to export 30 per cent of the produce.
In his view, the Minority Spokesman on Mines and Energy stated that COCOBOD is better placed to do the exporting.
Mr Yaw Osafo-Maafo, NPP-Akim Oda, shared the views of his colleagues and said the Minority is opposing the loan "because it has problems".
For instance, he said, the condition that makes reference to government's diversification of the external marketing of Cocoa is a matter of great worry to the Minority, adding, "anything that affects the Cocoa Industry should be taken seriously."
Members from the Majority side, including Mr Edward Doe Adjaho, Majority Chief Whip, Mr Modestus Yawo Ahiable, MP for Ketu North, Mr Simon Anyoa Abingya, Deputy Minister of Mines and Energy and MP for Bolgatanga, and Mr Kosi Kedem, MP for Hohoe South, gave their blessings to the motion and asked that the loan be approved.
Mr Victor Selormey, Deputy Minister of Finance, assured the House that the loan is intended to bridge the gap within this year's budget, thus helping to implement it fully.
He pointed out that one positive side of the loan is that it will not require any counterpart funding from government.
Mr Selormey stated that since the loan's conditionalities are meant to deepen the gains so far chalked under the ERP, "we will be cutting our nose to spite our face" if we vote against it.
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Return to top First quarterly review of economy before Parliament
Accra (Greater Accra) 2nd July ’99
Government revenue and grants for the first quarter of 1999 amounted to 858 billion cedis, representing 4.3 per cent of the gross national product (GDP) and exceeding the projected target of 844 billion cedis by 4.2 per cent of GDP.
This was contained in the 1999 first quarterly report on the review of the economy, which was laid before Parliament on Wednesday by Mr Moses Asaga, a Deputy Minister of Finance.
The report said over the same period, government expenditure amounted to 1,355 billion cedis.
Out of this, statutory expenditure was 496 billion cedis, representing 37 per cent while the other 63 per cent was discretionary expenditure.
Discretionary expenditure totalled 859 billion cedis out of which personal emoluments took 289 billion cedis or 21 per cent of the total.
The report said in comparison, this amount is eight billion cedis less than the target for the quarter.
Other items in this category, namely, administration, service and investments recorded 22 billion cedis, 31 billion cedis and 517 billion cedis in that order.
The report said repayment of external principal amounted to 191 billion cedis, 37 per cent above the level of payment during the first quarter of 1998.
It said 65 billion cedis was spent to service external interest obligations, including domestic interest payments on which 177 billion cedis was expended instead of 205 billion cedis that was initially expected for the quarter.
The report indicates that this development reflects the steady decline in Treasury bill interest rates that began in May, last year.
Releases to the District Assemblies' Common Fund amounted to 30 billion cedis while 33 billion cedis was transferred to households in terms of pensions and gratuities.
On fiscal review, the report indicated that the situation was broadly on target, saying domestic revenue collections exceeded the target by 42 billion cedis, while both the overall fiscal deficit on a commitment basis and the domestic primary balance were slightly below the target.
The report explained that because the projected divestiture receipts did not materialise, the overall cash deficit was slightly more than it was in the first quarter of 1998, adding that the domestic primary balance however, continued to be positive.
The overall balance on commitment basis recorded a shortfall of 286 billion cedis (1.4 per cent of GDP), compared with 290 billion cedis (1.5 per cent of GDP) expected for the quarter.
The report said, when account is taken of payment of arrears and divestiture receipts, the overall cash deficit amounted to 306 billion cedis compared with 295 billion cedis targeted for the period.
The domestic primary balance for the review period recorded 99 billion cedis surplus, which is 0.5 per cent of GDP.
The report said the overall budget deficit for the first quarter was financed predominantly from domestic sources, amounting to 283 billion cedis, adding that nearly three-quarters of the funding was from the non-banking sector.
The document explained that the higher borrowing from the non-banking sector was in response to the effort of the Bank of Ghana to reduce total money in circulation and hence help reduce inflation.
It said government borrowing from foreign sources amounted to 213 billion cedis, while amortisation recorded 190 billion cedis, bringing in a foreign inflow of 23 billion cedis.
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