The Monetary Policy Committee has announced an increase in its Prime Rate by 1.5 percentage points to 18.5 per cent in a bid to stem inflation and reduce exchange rate expectations.
Inflation is steadily on the rise, reaching a five-year high of 19.86 percent at the close of January.
Speaking at a press conference in Accra on Tuesday, Dr. Paul Acquah, Chairman of the Committee, said a raise in the rate was necessary to deal with price inflation and to withdraw some stimulus from the economy and to put it on the path to stability.
Inflation is expected to peak early in the second quarter before returning to the range of 10-13 percent by the end of the year.
Dr. Acquah said the Rate would gradually be reduced in line with future forecast of inflation.
He said tight monetary policy was necessary to deal with the huge fiscal and external accounts deficits.
“It should also provide support to the prospective tightening of fiscal policy in the budget for 2009,” Dr Acquah said.
Touching, on revenue and expenditure, Dr. Acquah said while total revenue and grants amounted to GH¢5.6 billion, total expenditure on the other hand stood at GH¢8.0 billion.
This resulted in a budget deficit of GH¢2.5 billion, which is about 14.9 percent of GDP last year.