Inflation has fallen in recent months from 10.3 per cent in March to 7.5 in May within the Bank of Ghana target band of 8 per cent plus or minus two percentage points.

“The latest forecast remained broadly unchanged with inflation projected to remain within the band and around the central path in the forecast horizon barring any upside risks from fiscal pressures,” the Committee said in a statement after its meetings.

The statement said while global growth recovery was ongoing, driven by continued policy support and rising consumer confidence, the outlook remained uncertain due to uneven vaccination across regions, rising COVID-19 infection rates fueled by new variants of the virus, cases of vaccine hesitancy and divergence in the recovery across jurisdictions.

It said the opening-up of economies, rising inflation abroad, stronger growth outcomes in advanced economies with possible interest rate responses from central banks were beginning to shape investors’ behaviour with potential impact on the domestic bond market.

However, the banking sector performance reflected sustained growth in customer deposits, investments, total assets, and profits and key financial soundness indicators remain healthy in relation to liquidity and solvency.

The Committee based on macro-prudential risk assessments expected the banking sector to withstand mild to moderate credit risk shocks although a new wave of the pandemic in Ghana could further elevate credit risks and would require close monitoring of banks’ capital and liquidity buffers.

“The growth rebound which began in the last quarter of 2020 has continued into the first half of 2021,” it added.

The Committee expressed concern about the continued sluggishness in new lending by banks which could undermine the growth momentum.

It said the slow growth in lending reflected increased credit risks on account of uncertainties in the business environment due to the impact of COVID-19 pandemic on the real sector, coupled with very high yields offered on Government securities due to increased Government borrowing.

On fiscal operations, the Committee noted that the budget deficit exceeded its target in the first five months mainly on the back of revenue underperformance.

Going forward, expenditure has to be aligned to revenue performance to support the fiscal consolidation efforts.

“At 76.6 percent of GDP in May 2021, the level of public debt raises debt sustainability concerns and the Committee reiterated the importance and urgency of fiscal consolidation efforts,” it said.

The Committee said greater efficiency in debt management would be required, especially in the face of potential further tightening of global financing conditions, which could heighten rollover risks and access to new financing in the outlook.

It, therefore, called for strong vigilance and complementarity in fiscal and monetary policies to signal to the markets a strong commitment to consolidation.

The capital and financial accounts recorded an inflow of US$3.3 billion compared with US$1.6 billion for the same period in 2020, driven by higher portfolio and foreign direct investments inflows.

As a result of these developments, the overall balance of payments recorded a surplus of US$2.4 billion in the first half of 2021, against a surplus of US$1.0 billion in the corresponding period of 2020.

The improved balance of payments outturn supported the build-up in Gross International Reserves (GIR) to US$11.0 billion, equivalent to 5.0 months of import cover at the end of June 2021. At end December 2020, Gross International Reserves stood at US$8.6 billion (or 4.0 months of import cover).

On exchange rate performance, available data as at July 22, 2021, shows that cumulatively, the Ghana Cedi recorded a depreciation of 0.6 percent against the US dollar, compared with a depreciation of 2.5 percent for the same period of 2020. The Ghana cedi also depreciated by 1.2 percent against the Pound Sterling but appreciated by 3.6 percent against the Euro over the same period.