Cash in circulation dips by 7.9%

Growth in reserve money moderated for the first four months of this year but better than the same period in 2018, the Bank of Ghana’s Monetary and Financial Developments have revealed.
Annual growth in Reserve Money (the total amount of bank notes and coins circulating in the economy) slowed to 7.9 per cent in April 2019 compared with 14.8 per cent growth a year earlier.

According to the Bank of Ghana, there was a significant decline on Net Domestic Asset (NDA) as against a growth in Net Foreign Assets (NFA).

“From the sources side, the growth in Reserve Money was mainly attributable to substantial increase in Net Foreign Assets (NFA, mainly on account of inflows from the 2019 Eurobond issuance, which was however offset by a decrease in the Net Domestic Assets (NDA),” the regulator said.

The NFA recorded a 50.9 per cent year-on-year growth in April 2019 compared to a contraction of 22.5 per cent in April 2018, while the NDA contracted by 97.5 per cent on year-on-year basis, compared to a sharp contraction over the same comparative period.

Money supply growth broadly stable
The report emphasized that annual growth in broad money, including foreign currency deposits (M2+) grew by 18.5 per cent in April 2019 to GH¢81.02 billion compared with 17.5 per cent yearly growth at the end of April 2018.

In terms of components, M2+ growth was driven by currency with the public and foreign currency deposits. On the sources side, it said the growth in total liquidity reflected an increase in NFA which was partly moderated by growth in NDA.
NFA grew by 42.1 per cent in April 2019, compared with a contraction of 24.4 per cent a year earlier. However, NDA grew by 11 per cent compared with 42.1 per cent growth over the same corresponding period.

Interest rates reflect mixed trends
According to the report, interest rate developments in the money market for April 2019 showed mixed trends.

While rates on Bank of Ghana bills, deposit rates and lending rates of banks decreased, rates on several Government of Ghana securities increased. The Monetary Policy Rate (MPR) remained unchanged at 16 per cent in April 2019. This compares with 18 per cent in April 2018.

On the treasury market, interest rates continued to trend upwards. The 91-day Treasury bill rate has stabilised at 14.7 per cent from February to April 2019, up from 13.3 per cent in April 2018. Similarly, 182-day rate remained stable at 15.1 per cent for the same period, compared with 13.9 per cent in April 2018.

The rate on the 1-Year Note remained unchanged at 18.1 percent in February, March, and April 2019 from 17.38 per cent in January 2019. The rate on 2-year Treasury note also remained unchanged at 19.8 per cent over the first four months of 2019 compared with 16.5 per cent in April 2018. Rate on the 3-year Government of Ghana bond rose to 20 per cent in April 2019 compared with 16.5 per cent in April 2018.

The weighted average interbank lending rate, that is, the rate at which commercial banks lend to each other, however, declined to 15.2 per cent in April 2019 from 17.5 per cent same period last year, in line with declining trends of the monetary policy rate. Similarly, average lending rates of banks also declined to 27.7 per cent from 28.2 per cent over the same comparative periods.

Deposit Money Banks’ interest rates
The 3-month time deposit stabilized at 11.5 per cent. Similarly, the rate on savings deposits remained unchanged at 7.55 per cent over the same period. However, the rates on the 6-month time deposit declined from 11.5 per cent to 10.5 percent over the same comparative period.

On the other hand, banks’ deposit rates continued to ease over the 12-month period to April 2019.
The spread between the borrowing and lending rates reduced by 49 basis points, year-on-year, from 16.66 per cent recorded in April 2018 to 16.17 per cent in April 2019.