Business
Ghana moves to bolster currency – adds 2 percentage points to interest rate
The Bank of Ghana was also under pressure to act because of inflation, which in December hit a three-year high of 13.5 percent in a country viewed as one of Africa’s brightest prospects because of its stable democracy and high gross domestic product (GDP) growth.
To that end, Wampah announced a series of measures on Wednesday to tighten foreign exchange controls.
An “initial forecast” showed that, without those measures, Ghana would miss its 11.5 percent upper target for inflation to land at 12 percent, he said. “What we are trying to do with these policies is to really make those cedi assets more attractive and therefore instead of going to buy dollars you will rather buy treasury bills, Bank of Ghana bills and so on,” he said.
Wampah also said he wanted to stop a burgeoning black market and the pricing of local transactions in dollars. Payment in dollars is becoming more common for rent and in other areas as people seek shelter from the falling cedi.
More broadly, he said the government should broaden its tax and export base and consider renegotiating stabilization agreements.
“I am pleased that they decided to go for a relatively large increase. Bold action is needed to prove to investors and traders that the central bank is serious about addressing the impact of the weakening cedi,” said Melissa Verreynne, an economist at NKC Independent Economists in South Africa.
Yvonne Mhango, an analyst with Renaissance Capital in South Africa, said she did not expect the impact of the rate decision on the currency to be significant as long as the country’s deficits remain large.
