GHANA’S central bank on Monday raised its main interest rate by 200 basis points to 19 percent to curb inflationary pressures and promote macroeconomic stability, Governor Ernest Addison said.
In March the Bank of Ghana raised its policy rate by 250 basis points to 17 percent – the largest hike in its history – to stem runaway inflation in one of West Africa’s more prosperous nations as the government cut spending to reduce the budget deficit and save a sliding local currency.
But in April the consumer inflation rate in the gold, oil and cocoa producer hit an 18-year high of 23.6 percent.
Addison said the total public debt stood at around 78 percent of gross domestic product.
Capital outflows have entirely offset a $1.3bn trade surplus gained from a 61 percent jump in crude oil export revenues in the first quarter.
Addison said that had created an overall balance of payments deficit of $934.5 million in the first quarter compared with $429.9 million in the same period last year.
‘The committee took the view that it needed to decisively address the current inflationary pressures to re-anchor expectations and help foster macroeconomic stability,’ Addison told a press briefing in the capital Accra.
The rapid depreciation of Ghana’s cedi has slowed but the currency has still lost over a quarter of its value since the year began.
Although the jump in April inflation was mainly driven by transport costs, prices rose for more than 96 percent of surveyed items, meaning most Ghanaians are feeling the pinch.
Central bank forecasts show a ‘prolonged horizon’ for inflation to return to its target band, Addison said.
Finance Minister Ken Ofori-Atta had said another hike would be a ‘knee-jerk reaction’ to mostly imported inflation, making it hard for the government to service its domestic debt.
Ofori-Atta has committed to managing Ghana’s debt without help from the International Monetary Fund.