GHANA’S central bank has decided to keep its main interest rate steady at 29 percent for the third consecutive meeting, citing the need for a strong monetary stance due to ongoing uncertainty about inflation. This decision was announced on Friday, contrary to economists’ expectations of a 50-basis-point cut.
‘Even though inflation is expected to remain within the target range for the year, the risks have tilted slightly upward,’ said Reuters quoted Bank of Ghana Governor Ernest Addison as saying at a news conference. ‘This necessitates maintaining a robust monetary policy, supported by strong fiscal consolidation efforts.’
Addison highlighted recent exchange rate pressures, an upward adjustment in utility tariffs, and rising export fuel prices as factors contributing to the uncertainty around the inflation path for the year. Ghana’s consumer inflation slowed slightly to 22.8 percent year-on-year in June, down from 23.1 percent in May, but remains well above the central bank’s target of 8 percent, with a margin of error of 2 percentage points.
Finance Minister Mohammed Amin Adam expressed optimism earlier in the week, stating that Ghana aims to achieve an inflation target of 15 percent by the end of 2024, with the economy rebounding faster than anticipated.
‘The central bank is clearly reacting to the stalling disinflation during the first half of 2024, which has put both its short- and medium-term inflation targets at risk,’ Leslie Dwight Mensah, an economist and research fellow at the Institute for Fiscal Studies in Accra told Reuters. He noted that the decision also considers the cedi’s recent depreciation and the economy’s limited foreign financing options.
Ghana, a major producer of cocoa, gold, and oil, is currently restructuring its $30bn debt as it navigates its worst economic crisis in a generation. Despite these challenges, Governor Addison remarked that economic activity in Ghana remains resilient due to a generally tight policy stance.
The country’s trade balance has improved in the first half of the year, driven by increased exports of gold and crude oil. ‘The value of gold exports increased by 46.4 percent to $5.04bn, while earnings from crude oil rose to $2bn from $1.7bn in the same period last year,’ Addison said.
