The Bank of Ghana (BoG) in its Monetary Policy Committee Report has disclosed that Ghana has failed significantly to meet its Gross Domestic Product (GDP) target for the just ended year 2023.
According to the BoG, fiscal performance based on provisional banking data on budget execution for January to December 2023 shows a deficit of around 3.0 percent of GDP, against a target of 5.5 percent of GDP.
While fiscal policy implementation was broadly aligned with requirements under the IMF ECF-supported programme, provisional data shows that the performance criteria targets on the primary fiscal balance on a commitment basis, non-accumulation of external debt payment arrears, and that no new collateralized debt by central government and public entities.
Base money growth slowed down significantly in the course of 2023 and was supportive of the disinflation process. Growth in reserve money defined to include currency outside banks and commercial banks reserves, slowed down significantly to 29.2 percent by end December 2023 relative to a growth rate of 57.5 percent observed in December 2022. The sharp slowdown was driven in large parts by strong sterilization efforts and effective liquidity management operations.
With a tight monetary policy stance and increased risk aversion of banks due to rising credit risks, private sector credit expansion broadly remained sluggish in the year. In December 2023, the pace of growth in private sector credit slowed to 10.7 percent, compared with 31.8 percent annual growth in December 2022. In real terms, credit to the private sector contracted by 10.2 percent relative to a 14.5 percent contraction, recorded over the same comparative period.
The Money Market
On the money market, interest rates broadly trended downward at the short end of the yield curve. The 91-day and 182-day Treasury bill rates decreased to 29.49 percent and 31.70 percent respectively, in December 2023, from 35.48 percent and 36.23 percent respectively, in the corresponding period of 2022. Similarly, the rate on the 364-day instrument decreased to 32.97 percent in December 2023 from 36.06 percent in December 2022.
The interbank weighted average rate remained well-aligned within the policy corridor by the end of 2023. The weighted average rate increased to 30.19 percent in December 2023 from 25.51 percent in December 2022, in line with the monetary policy rate and supported by adjustments made in the cash reserve ratio. The average lending rates of banks eased marginally to 33.75 percent in December 2023 from 35.58 percent a year earlier.
The BoG noted that the banking sector’s performance improved as adverse spillovers from the domestic debt restructuring and macroeconomic challenges receded. As at end 2023, the data shows that the banking sector remains stable, liquid, and profitable. Profitability improved for the sector from the loss position recorded in the 2022 audited accounts, reflecting sustained increases in net interest income and fees and commissions.
The industry’s balance sheet was generally strong, underscored by increased assets in December 2023, funded largely by deposits. Key financial soundness indicators remained 4 broadly positive with the Capital Adequacy Ratio (adjusted for reliefs) above the regulatory minimum, while liquidity and profitability ratios were higher in December 2023 compared to the same period last year.
The Non-Performing Loan ratio, however, increased in 2023, because of general repayment challenges on the part of borrowers, reflecting the impact of general macroeconomic challenges encountered in 2022. The latest stress tests indicate that the sector remains stable on the back of the on-going recapitalisation process by shareholders alongside support from the Ghana Financial Stability Fund.
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