The Bank of Ghana (BoG) has raised the policy rate by 250 basis points to 24.5 percent.
The Governor of the Bank of Ghana, Dr Ernest Addison announced the rate hike today, (October 6, 2022) when he addressed the media.
The rate hike is the second highest in the bank’s history and is meant to fight price pressures, with inflation almost at 40 per cent.
The BoG Governor said the increment was also meant to contain capital outflows which could worsen the cedi’s depreciation.
“Although the forecasts are for monthly inflation to continue to slow down, the risks are on the upside, emanating largely from pass-through effects of the currency depreciation, the recent upward adjustment in utility tariffs, and rising inflation expectations,” the central bank governor, Dr. Ernest Addison said.
The Bank of Ghana also noted a decline in Gross International Reserves to $6.6 billion, which represents about three months of import cover for goods and services.
This compares with the December 2021 position of $9.7 billion, which was equivalent to over four months of import cover.
“Net International Reserves, which excludes encumbered assets and petroleum funds, is estimated at US$2.7 billion as at September 2022,” Dr. Ernest Addison noted.
While Ghana has been noted as having one of the worst-performing currencies in 2022, the Bank of Ghana said the outlook for the Ghana Cedi has improved.
This has been aided by the recent disbursement of the loan from Afreximbank of US$750 million, the signing of the syndicated Cocoa Loan of $1.13 million.
The Bank of Ghana has also said there has been an agreement with gold and oil companies to purchase the repatriated foreign exchange earnings of about $83.9 million so far.
Ghana’s struggles in 2022 were underscored by the recent World Bank Africa Pulse report which noted the high debt-to-GDP ratio which is projected to hit of 104.7 percent.
Ghana was among Eritrea, Sudan, Cabo Verde, and Mozambique with projected ratios above 100%.
The International Monetary Fund is currently conducting a debt sustainability exercise in the country as Ghana seeks a bailout.