Ghana's central bank surprised analysts on Monday by raising its main interest rate to 29.5%, indicating that the monetary committee does not yet see the country's economic situation stabilizing despite two months of slower inflation.
Ghana, one of West Africa's most lucrative economies, is experiencing its worst financial crisis in the last 2 decades and is restructuring its debt in order to get a $3 billion loan from the International Monetary Fund.
In an effort to limit spiraling price surges, the central bank has raised its primary lending rate by 12.5 percentage points in the last year, from 17% in March 2022 to 54.1% in December.
The Bank of Ghana Governor Ernest Addison disclosed during a news conference that fixing Ghana’s flailing economy is directly tied to fixing its monetary complications.
"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," he stated.
Consumer inflation in Ghana fell to 52.8% year on year in February, down from 53.6% in January. On Monday, Addison predicted that inflation will hit 29% by the end of the year.
The Central Bank governor stated on Monday that discussions with lenders were "doing well," and that the bank had finalized a zero financing agreement with the finance ministry for the 2023 budget, which was a prerequisite for IMF program support.
The governor of the Bank also stated that commercial banks' necessary reserve ratios will rise to 14% from 12% beginning April 13, with the intention of ensuring banks have enough liquidity in the aftermath of the country's domestic debt restructuring, which was concluded last month.
The governor of the Bank also stated that commercial banks' necessary reserve ratios will rise to 14% from 12% beginning April 13, with the intention of ensuring banks have enough liquidity in the aftermath of the country's domestic debt restructuring, which was concluded last month.