Ghana holds interest rate at 29% over worse inflation outlook

AFRICAN BUSINESS AND ECONOMYMarch 29, 2024 at 12:57 PM UTC

TLDR

Ghana Central Bank maintains main interest rate at 29% following slight inflation increase and subsequent deceleration.
Central bank governor Ernest Addison warns of elevated inflation trajectory compared to previous forecasts.
Monetary Policy Committee adjusts Cash Reserve Ratio to encourage bank lending over investing in Treasury bills.

This week, Ghana's central bank opted to maintain its main interest rate at 29%, citing a slight deterioration in the inflation outlook over the past two months, necessitating vigilant monitoring.

Although inflation experienced a minor increase in January before decelerating in February, central bank governor Ernest Addison highlighted during a news conference that the latest inflation forecasts indicated a more elevated trajectory compared to the previous policy meeting in January.

In addition to holding the interest rate steady, the bank's Monetary Policy Committee decided to adjust the Cash Reserve Ratio (CRR) with the aim of incentivizing banks to prioritize lending over investing excess funds in Treasury bills.

Key Takeaways

In January, Ghana successfully negotiated a restructuring agreement for $5.4 billion of loans with its official creditors. Presently, the nation is actively seeking a similar arrangement with holders of approximately $13 billion in international bonds. As a significant producer of cocoa, gold, and oil in West Africa, Ghana is navigating through its most severe economic downturn in decades, prompting the need for debt restructuring measures. Supported by a $3 billion International Monetary Fund (IMF) program, Ghana is working towards economic recovery. The IMF was scheduled to conduct a second review of Ghana's Extended Credit Facility-backed program in April. A favorable outcome could lead to a meeting of the IMF's executive board in May to deliberate on the second review and potentially approve another loan disbursement. Additionally, Ghana's cocoa board, COCOBOD, is receiving a $200 million loan facilitated by a consortium of cocoa buyers, further contributing to the country's financial stability and recovery efforts.

Ghana

Inflation

Interest Rates

Economy

IMF