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BoG MPC to hold 'crunch' meeting over economic downturn

Dr Ernest Addison 480x430 1121212 Governor of the Bank of Ghana, Dr. Ernest Addison and Chairman of the MPC

Tue, 16 Aug 2022 Source: www.ghanaweb.com

The Monetary Policy Committee of the Bank of Ghana has scheduled Wednesday, August 17 to hold an emergency meeting on the challenges facing the country’s economy.

A statement from the Central bank indicated that the meeting will be climaxed by the communication of decisions reached.

“The Monetary Policy Committee (MPC) of the Bank of Ghana will hold an emergency meeting on Wednesday, 17th August 2022 to review recent developments in the economy. The meeting will conclude with an announcement of the decisions of the Committee,” the statement read.

Background

The economy has in recent times experienced a meltdown with economists pointing to the depreciation of the Ghana Cedi, inflation rate and fuel price hikes.

Government has also partly blamed the ravages of the COVID-19 pandemic and the ongoing Russia-Ukraine war as causative factors, promising to put in place measures to curb the economic burden imposed on citizens.

Recently, Standard and Poor's (S&P) Global Ratings on Friday, August 5, pushed Ghana's debt further into speculative territory, lowering its foreign and local currency sovereign ratings to CCC+/C from B-/B.

S&P which is one of the ‘Big Three’ credit-rating agencies, including Moody's Investors Service and Fitch Ratings, in their report stated that the “Covid-19 pandemic and the conflict in Russia have magnified Ghana's fiscal and external imbalances.”

"There is also demand for foreign currency that has been driven higher by several factors, including nonresident outflows from domestic government bond markets, dividend payments to foreign investors and higher costs for refined petroleum products.

"While these changes could improve the tax take going forward, the situation remains challenging, and over the first half of 2022, the fiscal deficit has exceeded the government's ambitious target," S&P Global Ratings stated.

Fitch, on the other hand, also downgraded Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to 'CCC' from 'B-'.

In a report on Wednesday, August 10, 2022, Fitch said the downgrade reflects the deterioration has contributed to a "prolonged lack of access to Eurobond markets, in turn leading to a significant decline in external liquidity" and pushing Ghana deeper into junk territory.

"In the absence of new external financing sources, international reserves will fall close to two months of current external payments (debits in the current account) by end of 2022.

"Fitch estimates that Ghana faces USD2.75 billion of external debt servicing in 2022, including amortisation and interest, and USD2.8 billion in 2023. Access to external financing will remain tight, as Ghana is likely to remain locked out of Eurobond markets, which had come to be a regular source of external financing for the government," the credit rating agency added in its statement.

Meanwhile, economist Dr. Theo Acheampong has also advised the Bank of Ghana to halt policy rate hikes amid economic downgrades.

In a Facebook post on August 11, the economist said the move will strangle the economy.

“With two almost junk status sovereign downgrades in the space of a week by S&P and Fitch, and with inflation also at an unprecedented 32%, any further attempts by the Bank of Ghana to hike the policy rate in an attempt to control inflation will likely strangle the economy by making the cost of credit extraordinarily high for businesses and households,” part of his post read.



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Source: www.ghanaweb.com
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