Ghana announces further rate hike to restrain inflation

ACCRA - Ghana’s central bank announced a 100 basis points hike in its benchmark lending rate Monday to restrain inflationary pressure and support macroeconomic adjustments.

Ernest Addison, Governor of the Bank of Ghana, announced this at a press briefing after the bank’s Monetary Policy Committee (MPC) meeting. “The MPC sees the need to remain vigilant and moderate liquidity in the system to underpin ongoing macroeconomic adjustments to drive down inflation. Under the circumstances, the committee decided to increase the policy rate to 28 percent,” said Addison. Bank of Ghana hiked its rate by a record 250 basis points to 17 percent in March 2022 to arrest inflation which had started rising abnormally. But the inflation kept its upward surge till it reached an all-time-high of 54.1 percent in December. “Inflation remained elevated in 2022, driven by both demand pressures and supply shocks. Underlying inflationary pressures similarly remained elevated. The bank’s core inflation measure, which excludes energy and utility, accelerated to 53.2 percent in Dec. 2022 from 49.7 percent in November,” added Addison.

He said the elevated inflation pressure had affected economic growth in 2022, projecting that “growth will moderate further and remain below potential over the near term, based on the elevated inflation levels.” The West African nation exporting gold, cocoa, and crude oil has been in an economic quandary since 2022 due to chronic budget over-runs, spiraling public debt, severe foreign exchange depreciation, and inflation galloping at a fast rate not seen in the country after the economic recovery and structural adjustment programs of the 1980s. As the weak macroeconomic fundamentals kept imposing severe hardships on citizens, with the cost of living increasing daily, the government decided last July to seek support from IMF to stabilize the situation.