Monetary Policy
MPC Press Release - December 2003
Wednesday, 31 December 2003 00:00

Since the last Monetary Policy Committee meeting, information and data that have become available point to improving economic fundamentals and an outlook for inflation and growth for the near term that is much better than forecast earlier in the year, with strong signals that the disinflation process is firmly taking hold.


Government finances have continued to improve. Robust revenue generation with expenditure kept within budgeted levels resulted in a sharp reduction in the fiscal deficit, a large decline in the domestic public debt/GDP ratio, and a cutback in the domestic borrowing requirements of the Central Government. Debt relief and disbursement from donors have been close to amounts pledged and coordinated under the Multi-Donor Budget Support System. Net domestic financing of the government budget at the end of November 2003 indicates a surplus of some ¢132.5 billion (1.0 percent of projected revenue) compared to a deficit of ¢2,242 billion for the same period in 2002, and the zero target established for the current budget year.

The monetary aggregates have also continued to slow down towards levels that signal significant reduction in the liquidity overhang from the preceding year and in line with policy targets. Year-on-year growth in reserve money declined from 42.6 percent in December 2002 to 26.0 percent in November 2003. Similarly, broad money (M2+) growth had been curtailed by some 15 percentage points in December 2002 to 35.0 percent by September 2003 (the latest date for which comprehensive data for the banking system is currently available).

The external payments position has improved substantially. This was aided by a large cocoa harvest combined with cyclically favourable cocoa and gold prices and significantly increased inflows of other foreign exchange in the form of remittances and other private transfers. Provisional figures for the first three quarters of the year show improved trade and current account positions.


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