Ghana’s central bank raises interest rate to 22%

The Bank of Ghana raised its benchmark interest rate by 300 basis points to 22 percent in its latest effort to tackle the country’s rising inflation.

The decision was taken at the central bank’s emergency meeting on Thursday. The bank had, in light of rising inflation in July and heightened pressures in the foreign exchange market, called the meeting to deliberate on the underlying drivers.

Headline inflation rose to 31.7% in July from 29.8% in June, the 11th consecutive month of increases. Food inflation rose from 30.7% in June 2022 to 32.3% in July.

“The Ghanaian Cedi has depreciated by 25.5% since the beginning of the year, reflecting the specific situation in Ghana, including the difficult financing of the budget by domestic and external sources, the deterioration of the sovereign credit rating , non-resident divestment in local currency bonds and loss of reserve buffers,” the bank said.

The bank said the execution of the country’s budget for the year remained difficult.

“Revenues have not kept pace with projections and have created funding challenges. In the absence of access to the international capital market and given domestic constraints
financing, the central bank overdraft helped close the financing gap, as indicated in the mid-year budget review. The Bank of Ghana is working with the Ministry of Finance to agree an overdraft limit,” he said.

The bank said it intended to raise foreign currency from mining and oil companies to boost its foreign exchange reserves.

“To stimulate the supply of foreign exchange to the economy, the Bank of Ghana is working with mining companies, international oil companies and their bankers to purchase all foreign exchange derived from the voluntary repatriation of export earnings from mines, oil and gas companies.
strengthen central bank currency auctions,” he said.

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