Bank of Ghana hikes monetary policy rate to 24.5%

The Monetary Policy Committee of the Bank of Ghana has hiked the monetary policy rate by 250 basis points from 22 percent to 24.5 percent.

The move according to the central bank is expected to stem inflation which has been soaring in recent months due to the depreciation of the cedi, upward adjustments in tariffs and Ghana awaiting to access an IMF-supported programme.

"On the fiscal situation, while expenditures have been broadly on target, revenue performance has been below expectations, complicating fiscal policy implementation."

"Financing the budget so far has been predominately done by the banking sector with the central bank absorbing a larger share. Persistent uncovered auctions and portfolio reversals by non-resident investors continue to pose risks to the financing of the budget resulting in the monetization of the budget deficit by the central bank," he explained.

"The MPC recognises the fact that the current condition is optimal and will be interim until agreements are reached on an IMF-supported programme. The Committee assesses that the engagement with the IMF has been positive and early conclusion of programmes discussions will help re-anchor stability"

Dr. Addison, however, added that the outlook for the Ghana Cedi has improved aided by the recent disbursement of a $750 million loan facility from Afreximbank.

He also attributed the signing of the $1.13 billion COCOBOD syndicated loan and the agreement with gold and oil firms to purchase repatriated foreign exchange earnings estimated at US$83.9 million thus far will help stabilise the exchange rate.

"Inflation remains elevated and the balance of risk remains on the upside. Although the forecast are for monthly inflation to continue to slow down, the risks are on the upside emanating largely from the pass-through effects from the cedi depreciation, upward adjustment in utility tariffs and rising inflation expectations."

"The Committee remains committed to re-anchoring inflation expectations and returning to a disinflation path. Under the circumstances, the MPC decided to increase the policy rate by 250 basis points to 24.5 percent."

BoG Governor and Chairman of Committee, Dr. Ernest Addison made the announcement at a press conference held on October 6, 2022.

MA/FNOQ

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