Ghana’s central bank lifted its key interest rate by more than expected — extending its steepest phase of monetary tightening — to ensure inflation decelerates at a faster pace.
The monetary policy committee raised the key rate by 150 basis points to 29.5 percent, Governor Ernest Addison told reporters in Accra, the capital, on Monday. None of the nine economists in a Bloomberg survey forecast an increase of that size.
The MPC has now hiked by 16 percentage points since November 2021 to stem an almost 50 percent slide in the cedi against the dollar because of concerns about its ballooning debt load, fanning inflation, which at 52.8 percent is more than five times the 10 percent ceiling of its target range. The inflation rate is projected to decline to 29 percent by year-end, Addison said.
“Inflation is too high,” he said. “From the macroeconomic perspective, we have to drive the rate of inflation down into single digits. That’s why the monetary policy has been raised to address the high level of inflation.”
The cedi gained 0.8 percent to 12.0726 per dollar by 14:25 p.m. in Accra. The yield on Ghana’s $1 billion of Eurobonds due 2026 fell 11 basis points to 52.2 percent.
Cheaper crude and a decision by the government to unilaterally stop payments on Eurobonds and other external debt — pending an agreement with creditors that are needed to unlock an International Monetary Fund bailout — have reduced dollar demand and helped steady the cedi this year.
Ghana, which had hoped to receive final approval for a $3 billion support package from the IMF this month, is now targeting an agreement by the end of April after bilateral creditors give the necessary financial assurances, Addison said.
“Once that is out of the way, once we have signed a memorandum of understanding on zero-financing, once the parliament passes revenue measures, we would have completed what they call the prior actions,” he said. “This is what is needed for the Fund to set a date for the executive board meeting.”
(Story first published by Bloomberg)