The Central Bank of Ghana has implemented measures to address economic challenges faced by the country in response to the surging inflation rate. One of these measures is raising the key interest rates by 30%, indicating a 0.5% increase.
This decision was announced at the conclusion of the apex bank’s monetary policy meeting on Monday. Financial analyst Richmond Frimpong highlighted the effectiveness of this rate hike in tackling the current economic crises in Ghana, stating that it is the best course of action during such challenging times.
Reuters, an American news agency, reported that Ghana’s central bank further increased its main interest rate by an additional 50 basis points, reaching 30 percent. Alongside this move, the central bank emphasized the importance of stricter fiscal policies to aid in reducing the persistently high inflation rates.
Ghana’s central bank governor, Ernest Addison, emphasized the necessity of the recent interest rate hike to maintain a disinflation trend and prevent it from deviating off course. After a decline for four consecutive months from the peak of 54.1% year on year in December, consumer inflation showed a slight increase in May and June.
The governor mentioned that policy tightening will continue until the desired inflation rate is achieved, while acknowledging the need for fiscal efforts to complement monetary policy in achieving low inflation rates.
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The governor’s remarks on fiscal consolidation coincide with Ghana’s Finance Minister Ken Ofori-Atta’s upcoming mid-term budget review to parliament. The central bank governor expressed a commitment to closely monitoring inflation figures in the following months and adjusting policies accordingly.
He was uncertain whether Ghana’s administration had initiated discussions with bilateral creditors on debt restructuring.
By increasing interest rates, the cost of borrowing money is raised, leading to a reduction in consumer spending. This measure aims to address the economic crisis in Ghana, which is characterized by a cost-of-living crisis, substantial public debt, and an inflation rate currently above 42%.
The World Bank predicts that the escalating cost of living, coupled with decreased purchasing power and rising food prices, will push an additional 850,000 Ghanaians into poverty by the end of 2022.
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To stabilize its economy and implement debt restructuring and other revenue-boosting measures, Ghana, Africa’s leading gold producer, has received the initial installment of a $3 billion (Ksh426.45 billion) rescue package from the International Monetary Fund, amounting to $600 million (Ksh85.29 billion).
