BoG introduces additional measures to tame inflation

Dr Ernest Addison

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has introduced additional monetary policy measures to mop up excess capital from the market to control inflation.

Inflation continue to decline and currently at 35.2 per cent after peaking at 54.2 per cent in last year December.

The new measures which are to take effect on November, 30, 2023 are the unification of the currency holding for the Cash Reserve Ratio requirement on foreign currency denominated deposits and domestic currency deposits for banks and the new unified Cash Reserve Ratio for total deposits (cedi and foreign currency) – are to be held in Cedis.

“This measure is to reinforce the Bank’s liquidity management operations to address excess structural liquidity conditions in the market and provide additional impetus to the disinflation process,” Dr Addison, the Governor of the BoG disclosed this during a news conference at the 115th regular meeting of the MPC in Accra on Monday.

He explained that the Cash Reserve Ratio requirement on foreign currency denominated deposits and domestic currency deposits of banks were being reset to 15 per cent.

Dr Addison said the Committee would continue to monitor developments in the banking sector and deploy other policy tools, as and when required, to support stability.

The Governor explained that the new directive would further help to bring inflation down and withdraw excess liquidity from the market.

Dr Addison disclosed that all the 23 universal banks had submitted re-capitalisation plans to the BoG, saying the Banking Supervision Department and the MPC had reviewed the plans and were credible.

“We are quite hopeful that within the next two years most of the banks would have capitalized and be able to meet the capital adequacy threshold without reliefs,” adding that “Right now they are meeting those capital threshold with regulatory reliefs.”

Dr Addison said the banking sector remained stable, sound, liquid and profitable, in spite of the impact of the Domestic Debt Exchange Programme (DDEP).

The Governor said profitability continued to improve as banks continued to invest in high yielding short-dated BOG and Government of Ghana (GOG) instruments.

“The banking sector showed some resilience as the various stress tests on banks’ capital, following adverse macroeconomic shocks, pointed to stability,” Dr Addison stated.

BY KINGSLEY ASARE