Ghana May Hold Key Rate at 16% Awaiting Eurobond Proceeds

Ghana’s central bank will probably keep its key interest rate on hold as proceeds from a sale of Eurobonds and loans for cocoa purchases boost dollar reserves, giving the regulator room to support a weaker currency.

The Bank of Ghana will maintain the policy rate at 16 percent tomorrow, according to seven of eight economists surveyed by Bloomberg. Andrea Masia, a Johannesburg-based analyst at Morgan Stanley, predicts an increase of 50 basis points, or 0.5 percentage point. The decision will be announced at about 11:00 a.m. in Accra, the capital.

The currency of the world’s second-biggest cocoa producer declined 7.8 percent against the dollar this year amid increased demand from manufacturers and traders for the U.S. currency in the import-dependent economy. Policy makers unexpectedly increased the key rate by one percentage point at its May meeting to help stabilize the currency and curb inflation, which reached 11.4 percent in June.

“The key concern in Ghana is the pressure on the cedi,” Samir Gadio, an emerging-markets strategist at Standard Bank Group Ltd. in London, said in an e-mailed response to questions yesterday. “The recent Eurobond issuance and the cocoa syndicated loan proceeds expected later this year will enable the Bank of Ghana to temporarily smooth some of the foreign-exchange imbalances.”

Cocoa Harvest

The bank is expected to swap cedis with the government for the $750 million raised in its Eurobond sale last week. It’s also targeting $1.2 billion from the Ghana Cocoa Board in September, when the regulator signs an annual trade-finance loan to buy the beans from farmers.

Ghana’s economy shrank 3.1 percent in the first quarter from the previous three months as industry output contracted amid months of electricity blackouts. Growth is forecast at 8 percent this year by the Finance Ministry, faster than the sub-Saharan African outlook of 5.6 percent estimated by the International Monetary Fund.

The cedi was unchanged from yesterday’s close at 2.0650 per dollar by 9:18 a.m. in Accra.

“The central bank would like to strike a healthy balance between inflation and growth,” Collins Appiah, executive director of asset management at NDK Financial Services Ltd. in Accra, said in a phone interview. “With the Eurobond proceeds, the bank can meet fluctuations in the exchange rate to curb the impact on inflation.”

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