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Ghana’s central bank cut its main interest rate by 100 basis points to 29% in a decision announced on Monday. its first rate cut since 2021, after inflation fell for the fifth consecutive month in December.
The West African cocoa, gold, and oil producer has been restructuring its debts as it tries to emerge from its worst economic crisis in a generation that saw inflation rocket beyond 50% in annual terms in late 2022.
But price pressures eased considerably over the second half of 2023, falling to 23.2% year-on-year in December from 26.4% in November and 35.2% in October. Bank of Ghana Governor Ernest Addison told a news conference that bank officials now forecast inflation would drop to 13%-17% by the end of the year and to 6%-10% by 2025.
The central bank targets inflation of 8% with a margin of error of 2 percentage points on either side. Several factors have supported the disinflation process, namely, the tightening monetary policy stance throughout 2023, favourable international crude oil prices which led to stable ex-pump prices and transportation costs, and relative stability in the exchange rate,” Addison said on Monday. He said there was still a need to maintain a strong policy stance.
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Ghana’s government earlier this month reached a milestone in its quest for debt relief when it agreed on a deal to restructure USD 5.4 billion of loans with its official creditors.
