By Ebi Kesiena
Ghana’s Central Bank on Monday, surprised analysts by raising its main interest rate to 29.5%.
According to the monetary committee, this move does not look good, as the country’s economic situation stabilized despite two consecutive months of slowing inflation.
Speaking at a news conference, Bank of Ghana Governor, Ernest Addison said, “To place the economy firmly on the path of stability and reinforce the basis for disinflation, it is important that monetary policy stance is tuned firmer to re-anchor inflation expectations toward the medium target.”
While Ghana’s consumer inflation slowed to 52.8% year-on-year in February, from 53.6% in January, Addison said on Monday, he expected inflation to reach 29% by the end of the year.
The central bank has hiked its main lending rate by 12.5 percentage points in the past year, from 17% in March 2022, in an effort to contain spiraling price rises, which reached a more than two-decade high of 54.1% in December.
Addison also announced that commercial banks’ required reserve ratios would increase to 14% from 12% starting April 13, in the hope of ensuring banks maintain adequate liquidity in the aftermath of a domestic debt restructuring the country, completed last month.
Addison added that negotiations with lenders were “proceeding well”, and that the Bank had finalized a zero-financing agreement with the finance ministry for the 2023 budget, which was a prior action required by the IMF for program support.
However, analysts are surprised by the rate hike, as Ghana secured a staff-level agreement through the International Monetary Fund in December for a $3 billion bailout loan, but must first ask bilateral lenders to provide financing assurances on existing debts before the IMF board can sign off on the program.
