Business
Ghana moves to bolster currency – adds 2 percentage points to interest rate
(Reuters) – Ghana’s central bank – The Bank of Ghana, raised its main policy rate by 200 basis points 18 percent on Thursday in a drive to curb a fall in the cedi currency and combat external pressures, Governor Henry Kofi Wampah told a news conference.
It was the first shift in the rate since May. A move had been expected, although most analysts forecast a 100 basis point rise. Analysts said they welcomed the decision.
Ghana follows emerging markets such as India, Turkey and South Africa that increased borrowing costs in January to support their currencies after the U.S. Federal Reserve’s decision to roll back its bond buying shook emerging markets.
Ghana’s strong growth is based on exports of gold, oil and cocoa but import-led demand for dollars caused the cedi currency to depreciate nearly 20 percent in 2013 and 4.7 percent so far this year, according to Thomson Reuters data.
The slide is just one macro-economic problems faced by the government.
“The uncertainties in the outlook and weakened domestic fundamentals underscored the need for continued tight fiscal and monetary policies and measures that will reduce the country’s vulnerability to shocks, re-anchor inflation expectations and sustain macro economic stability,” Wampah said.
“These informed the decision to increase the policy rate by 200 basis points,” Wampah said after an emergency meeting of the Monetary Policy Committee.
