The Bank of Ghana is anticipated to keep its benchmark interest rate steady at 29% to curb soaring inflation and stabilize the nation’s currency, the cedi.
This decision comes as Governor Ernest Addison prepares to announce the monetary policy committee’s (MPC) verdict later today in Accra.
According to a survey conducted by Bloomberg, most economists expect the MPC to maintain the current rate in an effort to control inflation, which has averaged around 25%, and to support the struggling cedi.
The Ghanaian currency has depreciated by approximately 10% against the US dollar since the MPC’s last decision to keep borrowing costs unchanged in March, marking it as the worst-performing currency globally over this period.
“I expect the Bank of Ghana to keep the policy rate on hold in May in order to bolster the cedi and prevent higher import prices from keeping inflation at the currently elevated level,” stated Mark Bohlund, a senior credit research analyst at REDD Intelligence.
The cedi’s decline has been significantly impacted by a sharp drop in cocoa earnings, with revenue from cocoa exports falling by 49% to $599 million in the first four months of this year.
Ghana, the world’s second-largest producer of cocoa, has faced adverse weather conditions, disease, and a fertilizer shortage, all contributing to decreased output.
In an effort to manage its economic challenges, Ghana is reorganizing most of its $42.2 billion debt as part of conditions for a $3 billion program from the International Monetary Fund (IMF).
Last Thursday, the nation received a draft agreement to restructure debts with its official creditors, a necessary step to secure a $360 million disbursement from the IMF expected by the end of June.
Economists like Bohlund and Courage Boti, of Accra-based GCB Capital Ltd., suggest that the MPC might be in a position to consider cutting rates at its July meeting.
They anticipate that the currency could start to recover with the forthcoming IMF disbursement, and the favorable base effects could lead to a sharp slowdown in inflation.
“The more appropriate time to look at a rate cut will probably be July, by which time the currency pressures would have eased and its full impact assessed,” said Boti.