Ghana News
Ghana’s Interest Rate Remains at 30% due to the Inflation Target.
Ghana’s interest rate remains at 30% due to the inflation target.
The Bank of Ghana has once again kept the country’s interest rate at a historic 30% in an effort to reduce the current inflation rate of 35.2%.
The country’s apex bank also increased the cash reserve ratio on bank deposits to 15% from 14%, effective November 30.
Between November 2021 and July 2023, the Bank of Ghana hiked the country’s benchmark rate from 13.5% to 30%, even as the country’s inflation spiked from 12.2% to 35.2% within the same period, peaking at 54.1% in December 2022.
According to Ernest Addison, the Governor of the Bank of Ghana, keeping the interest rate at 30% was because
“The disinflation process is expected to continue, supported by the current tight monetary policy stance, relatively stable currency, and the base drift effect.”
He also noted, “Inflation is decelerating; it remains high relative to the target; therefore, there is a need to keep the policy rate tighter for longer until inflation is firmly anchored on the downward trajectory towards the medium-term target.”
With an inflation rate of 35.2%, Ghana is quite a long way out from its central bank target of 10%; however, the country has hit its base effect, causing inflation to slow down.
What you should knowPost-COVID, Ghana entered into what has been termed “the worst economic crisis of a generation,” causing the country to seek intervention from the International Monetary Fund.
A crucial part of the requirements for the $3 billion loan from the IMF included Ghana’s restructuring of its $50 billion debt. Also in 2022, the country’s currency, the Ghana Cedi, depreciated by over 55%, causing the price of goods and services to spike, causing a cost-of-living crisis.
After receiving its first tranche of $600 million from the IMF in May 2023, the country’s economy began to turn a corner as its inflation rate has continuously declined since then.