Ghana’s central bank has maintained its main interest rate at 29% for the third consecutive meeting, citing the need for a strong monetary stance amidst ongoing inflation uncertainties. This decision contrasts with predictions from economists polled by Reuters, who had anticipated a 50-basis-point cut and expected a 200-basis-point reduction by year-end.
Bank of Ghana Governor Ernest Addison emphasized the necessity of maintaining a robust monetary policy due to the potential upward risks to inflation. He noted that despite expectations for inflation to stay within the target range, factors such as exchange rate pressures, increased utility tariffs, and rising export fuel prices contribute to uncertainty in the inflation outlook.
Ghana’s consumer inflation slightly decreased to 22.8% year-on-year in June from 23.1% in May, remaining significantly above the central bank’s 8% target, which includes a 2 percentage point margin of error. Finance Minister Mohammed Amin Adam expressed confidence that the country would achieve the year-end target of 15% by the end of 2024, citing a faster-than-expected economic rebound.
Economist Leslie Dwight Mensah of the Institute for Fiscal Studies in Accra noted that the central bank’s decision reflects concerns about stalled disinflation and the vulnerability of the cedi exchange rate, which has struggled due to limited foreign financing options.
Ghana is in the process of restructuring its $30 billion debt as it navigates its most severe economic crisis in decades. Despite these challenges, Governor Addison highlighted the resilience of economic activity and improvements in the trade balance, driven by increased exports of gold and crude oil. In the first half of 2024, the value of gold exports surged by 46.4% to $5.04 billion, while crude oil earnings rose to $2 billion from $1.7 billion in the same period the previous year.
