Bank of Ghana keeps key interest rate unchanged

The Bank of Ghana has decided to keep its monetary policy rate at 29 per cent, citing concerns about inflationary pressures and currency devaluation. Courage Boti, an Economist at GCB Capital, joined CNBC Africa to analyze the bank's latest policy stance. Boti highlighted the risks posed by inflation, with expectations of a sharp increase in March due to external factors like the FIBA's effect. He also noted the city's depreciation of over 6 per cent year-to-date, driven by demand pressures from sectors like oil importers. The recent surge in crude oil prices to $83 per barrel and geopolitical tensions in the Middle East and Europe further add to the uncertainties in the global market. Despite some positive developments like higher cocoa, oil, and gold prices, Ghana's currency, the CD, has lost 7 per cent of its value against the dollar since the beginning of the year. The Bank of Ghana aims to support the CD through strategies like increasing reserves and maintaining a tight monetary policy stance. Boti emphasized the importance of fiscal discipline and upcoming measures to address the country's debt restructuring challenges. Ghana is preparing for a second review by the IMF in April and engaging with international bondholders under a non-disclosure agreement. Details of the discussions remain confidential, but a proposal involving 40 per cent of assets is being considered. The outcome of these negotiations will be crucial for Ghana's economic stability and the future of its currency. Key Points: 1. Inflation and Exchange Rate Concerns: The Bank of Ghana's decision to hold the key interest rate reflects concerns about inflationary pressures and currency devaluation. External factors like rising crude oil prices and geopolitical tensions add to the uncertainties in the global market, impacting Ghana's economy. 2. Currency Depreciation and Reserve Management: The CD has depreciated by 7 per cent against the dollar in 2023, prompting the Bank of Ghana to increase reserves and adopt a tight monetary policy stance to stabilize the currency. Measures like maintaining fiscal discipline and addressing debt restructuring challenges are vital for economic stability. 3. IMF Review and Bondholder Negotiations: Ghana's upcoming second review by the IMF and discussions with international bondholders under a non-disclosure agreement will shape the country's economic outlook. The outcome of these meetings will impact Ghana's ability to address debt concerns and safeguard its currency. Quote: "The stakes are higher, the mid-year review will be a benchmark for everybody to measure this. The conversations around debt restructuring hinges largely on fiscal performance." - Courage Boti, Economist at GCB Capital.