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Bank of Ghana has raised its benchmark interest rate by 250 basis points to 17 per cent, Governor Ernest Addison said in a statement. The rate hike matches analysts’ predictions as Accra faces debt and liquidity challenges.
Ghana’s policy committee’s decision to book a steep increase in rate cannot be unconnected to drive to attract foreign investors into the country due to a weak external position and slowdown inflation pressures.
Accra has seen debt crisis pressures and has been blocked from the Eurobond market to raise much-needed credit, but analysts think its position has been stretched beyond what credit markets can accommodate.
The Ghanaian cedi has lost 20% since the year began, making it the second biggest losing currency after the Russian rouble.
Prices in Ghana have risen sharply in recent months, with consumer inflation coming in at 15.7% year-on-year in February, marking the sixth successive month the consumer price index print exceeded the Bank’s upper limit of its target range.
Today’s adjustment marks the highest rate hike in more than 20 years, signaling an aggressive stance against rising inflation, a depreciating local currency and worsening investor confidence.
“The uncertainty surrounding price development and its impact on economic activity is weighing down business and consumer confidence,” the bank’s governor, Ernest Addison, said during a news conference. “The risks to inflation are on the upside.”
Recall that Ghana had cut its prime rate to 13.5% last May, its lowest level since early 2012, citing muted near-term inflation risks but this did not last for more than four-month before it inched up to 14.5% in September 2021.
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