The Bank of Ghana has kept the interest rate at a record 30% for the second consecutive time in an effort to further reduce the nation’s inflation rate, which is at 35.2%.
With effect from November 30, the nation’s top bank also raised the cash reserve ratio on bank deposits from 14% to 15%.
The Bank of Ghana increased the benchmark rate for the nation from 13.5% to 30% between November 2021 and July 2023. During the same period, the nation’s inflation rate increased from 12.2% to 35.2%, reaching a peak of 54.1% in December 2022.
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According to Ernest Addison, the Governor of the Bank of Ghana, keeping the interest rate at 30% was because,
“The disinflation process is expected to continue, supported by the current tight monetary policy stance and relatively stable currency and base drift effect,”
He also noted, “Inflation is decelerating, it remains high relative to target therefore there is the need to keep the policy rate tighter for longer until inflation is firmly anchored on the downward trajectory towards the medium-term target,”
With an inflation rate of 35.2%, Ghana is quite a long way out from its central bank target of 10%, however, the country has hit its base effect, causing inflation to slow down.
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Post-COVID, Ghana entered into what has been termed “the worst economic crisis of a generation”, causing the country to seek intervention from the International Monetary Fund.
A crucial part of the requirements for the $3 billion loan from IMF included Ghana’s restructuring of its $50 billion debt. Also in 2022, the country’s currency, Ghana Cedi depreciated by over 55% causing the price of goods and services to spike, causing a cost-of-living crisis.
After receiving its first tranche of $600 million from the IMF in May 2023, the country’s economy began to turn a corner as its inflation rate has continuously declined since then.
