Bank of Ghana hikes monetary policy rate to 24.5%.

The Central Bank of Ghana.

The Monetary Policy Committee of the Bank of Ghana has decided to increase the monetary policy rate from 22 percent to 24.5 percent, which would result in a 250-basis point increase.

The decision, according to the central bank, is anticipated to bring down inflation, which has been skyrocketing in recent months owing to the devaluation of the cedi, upward changes in tariffs, and the fact that Ghana is waiting to access a programme backed by the IMF.

“On the fiscal situation, while expenditures have been broadly on target. revenue performance has been below expectations. complicating fiscal policy implementation.”

“Financing the budget so far has been predominantly done by the banking sector with the central bank absorbing a larger share. Persistent uncovered auctions and portfolio reversals by non-resident investors continue to pose risks to the financing of the budget resulting in the monetization of the budget deficit by the central bank.”, he explained.

“The MPC recognises the fact that the current condition is optimal and will be interim until agreements are reached on an IMF-supported programme. The Committee assesses that the engagement with the IMF has been positive and early conclusion of programmes discussions will help re-anchor stability.”

However, Dr. Addison noted that the prognosis for the Ghana Cedi has improved, which may be attributed to the recent delivery of a $750 million lending facility by Afreximbank.

He also attributed the signing of the $1.13 billion COCOBOD syndicated loan and the agreement with gold and oil firms to purchase repatriated foreign exchange earnings estimated at $83 9 million so far to help stabilise the exchange rate. Together, these two events are expected to contribute to the stabilisation of the exchange rate.

“Inflation remains elevated and the balance of risk remains on the upside. Although the forecast is for monthly inflation to continue to slow down, the risks are on the upside emanating largely from the pass-through effects from the cedi depreciation. upward adjustment in utility tariffs and rising inflation expectations.”

“The Committee remains committed to re-anchoring inflation expectations and returning to a disinflation path. Under the circumstances, the MPC decided to increase the policy rate by 250 basis points to 24.5 percent.”

Dr. Ernest Addison, Governor of the Bank of Ghana and Chairman of the Committee, made the announcement at a press conference that took place on October 6, 2022.

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