Monetary Policy
MPC Press Release - May 2004
Monday, 31 May 2004 00:00

Since the inflation jump that occurred in February 2003, inflationary pressures have continued to ease, a response of the economy to policies, the generally improved food supply situation and relative exchange rate stability. Developments in the Consumer Price Index since early in the year indicate that inflation has continued to fall steadily.

Headline inflation dropped from its January 2004 level of 22.4 percent to 11.3 percent in February, and 10.5 percent by March, and ticked up to 11.2 percent in April as a result of a seasonal surge in food prices during that month. The underlying monthly increases in the price index since April last year, remained within a range that was the lowest in recent years, with considerably reduced volatility.

The growth of the monetary aggregates continued on a downward trend. Year-on-year broad money (M2+) growth declined from 41.5 percent in March 2003 to 37.7 percent by March 2004, following the year-on-year growth in reserve money, which declined from 30.7 per cent in March 2003 to 28.9 per cent in March 2004.

Fiscal developments for the first quarter of 2004 indicate that domestic revenue performance was on track but government expenditure was higher than budgeted.

  • Total Government receipts for the first quarter amounted to ¢4,026 billion, an increase of 17.0 percent above total receipts for the same period in 2003 and compared to a budgeted estimate of ¢4,124 billion for the first quarter of 2004. Tax revenue exceeded budgeted targets whereas non-tax revenue fell short of target. Projected divestiture receipts of ¢106.0 billion did not materialize.
  • Total payments on the other hand amounted to ¢4,769 billion in the first quarter of 2004, compared to a budgeted estimate of ¢4136 billion, as sizeable spillover commitments from the preceding quarter were liquidated.
  • These developments resulted in a net domestic financing of government of ¢656.0 billion compared to a budgeted repayment of ¢255 billion, keeping some pressure on interest rates, though these remained stable within a narrow range.

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