The Bank of Ghana has opted to maintain its main interest rate at 27.00% amidst concerns over rising food prices that have led to an increase in consumer inflation for the second consecutive month. Although there has been a significant decrease in inflation over the past year, the central bank highlighted that the rate of decline has slowed since its last monetary policy meeting.
The central bank pointed out that inflation projections indicate a slightly higher trajectory, primarily driven by volatile food prices. It emphasized that the escalating cost of food remains a major worry for policymakers. In October, year-on-year inflation in Ghana rose to 22.1%, up from 21.5% in September. The bank now anticipates that inflation will reach its medium-term target of 6% to 10% by the fourth quarter of 2025, revising its earlier forecast of achieving this goal by the third quarter.
Ghana, known as the world’s second-largest cocoa producer, faced challenges with its $30 billion external debt in 2022, leading to a default on a significant portion of the debt due to excessive borrowing. However, the country is on the brink of fully recovering from this default following a lengthy debt restructuring process. President Nana Akufo-Addo’s administration secured a three-year, $3 billion bailout from the International Monetary Fund (IMF) in 2023 and is now in the final stages of completing the necessary steps for the funds to be disbursed.
The central bank reported that commercial banks in Ghana have bolstered their capital reserves sufficiently to withstand the repercussions of the external debt restructuring. The IMF’s executive board is scheduled to convene on December 2nd to approve the third review of Ghana’s $3 billion program, paving the way for the release of a $360 million loan tranche.
Overall, Ghana’s economic landscape is navigating through challenges posed by inflationary pressures and debt restructuring efforts, with the central bank taking a cautious approach to monetary policy in response to the evolving situation. The government’s collaboration with international financial institutions like the IMF underscores its commitment to stabilizing the economy and fostering sustainable growth in the long run.
