Ghana Set to Hold Key Interest Rate While IMF Talks ProceedMoses Mozart Dzawu and Ekow Dontoh
The Bank of Ghana will probably leave its key interest rate unchanged as it waits for approval of an International Monetary Fund loan before adjusting monetary policy further.
Governor Kofi Wampah will hold the rate at 21 percent on Wednesday, according to all nine analysts surveyed by Bloomberg. Policy makers increased the rate by two percentage points to an 11-year high on Nov. 12.
Ghana has said it wants a loan of as much as $1 billion from the IMF to help fund its budget deficit and support the cedi, the worst performer against the dollar over the past 12 months among 24 African currencies tracked by Bloomberg. Rising consumer prices and the worst power outages in a decade are slowing economic growth, adding to currency risks.
“Given the uncertainty that persists until a deal with the IMF is signed, and the likely pressure on the cedi until then, we expect the Bank of Ghana to be relatively cautious,” Razia Khan, the head of Africa research at Standard Chartered Bank Plc in London, said in an e-mailed response to questions on Feb. 16.
The government expects to sign a deal with the Fund by April, President John Dramani Mahama’s office said on Feb. 11.
The cedi has weakened 7.8 percent against the dollar this year, taking its loss in the past 12 months to 28 percent. Inflation slowed to 16.4 percent in January from a five-year high of 17 percent in December.
“Although inflation in January decelerated a touch, this was largely due to lower energy prices,” Khan said.
Ghana is seeking to narrow the fiscal deficit to 6.5 percent of gross domestic product this year, down from an average of about 10 percent in the past three years. The government is considering spending cuts and raising revenue from other sources as plunging oil prices curb state income.
“When you look at the the fall in the currency, especially in the last couple of weeks, one would expect the Bank of Ghana to keep the rate unchanged,” Yaw Adu-Koranteng, a research analyst at NDK Asset Management in Accra, said by phone on Feb. 16. “Current rates are already high.” The cedi rose 0.6 percent to 3.47 per dollar at 10:01 a.m. in Accra.