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Bank Of Ghana Raises Policy Rate To 29.5%

For the purpose of containing the rising inflation and any negative risks to the economy, the Bank of Ghana raised its policy rate by 150 basis points, to 29.5%.

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As a result, loans will continue to be expensive, which will have an impact on consumer spending and the expansion of the private sector.

In February 2023, the average loan rate increased slightly from the 35.58% reported in December 2022 to 36.64%. This translates to a monthly loan interest rate of 3.02%.

Dr. Ernest Addison, governor of the Bank of Ghana, announced the development only moments ago and noted that the easing of pricing pressures abroad is likely to have a favorable future influence on Ghana’s domestic inflation profile.

“Although headline inflation has somewhat decreased for the past two months, it has continued to be over the medium-term target of 8%. It is critical that the monetary policy stance be further adjusted to re[1]anchor inflation expectations towards the medium-term target in order to firmly establish the economy on the path of stability and accelerate the pace of disinflation. The MPC decided to raise the Monetary Policy Rate by 150 basis points to 29.5% in light of these factors, he said.

He claimed that the recent Domestic Debt Exchange Programme (DDEP) had a detrimental effect on banks, necessitating the necessity for the Central Bank to modify its regulatory criteria in order to support the banks.

“While the domestic economy continues to face relatively tight global financing conditions and increased uncertainty regarding the outlook for the world economy, the effects of these could be amplified inherent vulnerabilities including structural and excess liquidity following the DDEP and the widening negative outlook gap,” the report states.

On the basis of the most recent stress test, he claimed that the banks are still robust, sound, and stable.

In order to lessen the risks to the economy, he continued, the Monetary Policy Committee of the Bank of Ghana will keep an eye on changes in the banking sector.


He went on to say that with regard to fiscal policy, the Committee had noticed that the budget statement for 2023 had placed fiscal policy on a road toward consolidation that was compatible with the important terms decided upon at the staff level with the IMF in December 2022.

“The domestic debt exchange, new revenue initiatives, and structural fiscal reforms will deliver a considerable reduction in debt service and assist in generating fiscal space.”

Dr. Addison continued by saying that the fiscal outlook depends on funding the budget, which will necessitate the completion of the domestic debt exchange program and the acquisition of the necessary financing guarantees from bilateral donors.

There are signs that these conversations are going well. Given the foregoing, it is essential that Parliament give passing the revenue bills it is presently considering top priority. The Bank of Ghana and the Ministry of Finance have finalized a Memorandum of Understanding on zero financing to the budget, which would be signed soon, in accordance with the Staff Level Agreement with the IMF, he said.

He continued by saying that the essential tax measures will be passed by Parliament, concluding the necessary preliminary steps to submit Ghana’s program to the IMF Executive Board.

This, he claimed, will be essential in getting the economy back on track for recovery, as well as putting it firmly on a course toward sustained growth and disinflation.



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