Ghana MPC leaves MPR unchanged at 29%

The Bank of Ghana's Monetary Policy Committee has decided to keep the Monetary Policy Rate (MPR) unchanged at 29 per cent for the third consecutive time. This decision comes as recent price developments suggest a resumption of the disinflation process. Benjamin Boachie, Chief Economist at Secondstax, shared his insights on the impact of this move during a CNBC Africa interview. Boachie expressed his support for the decision to maintain the MPR, citing persistently high inflation in the range of 20 to 23 per cent, which remains well above the Bank of Ghana's target band. He emphasized the importance of sustaining restrictive financial conditions to tackle inflation effectively. Regarding the potential for a rate cut, Boachie noted that Ghana had already implemented a small 100 basis points cut earlier this year, bringing the rate down from 30 to 29 per cent. He highlighted the necessity of waiting for inflation to reach the year-end target of 13 to 17 per cent before considering another rate reduction. On the stability of the currency, Boachie expressed optimism, attributing the recent stability of the Ghanaian cedi to the government's bolstered reserves position. He pointed out a $275 million increase in reserves since April, signaling strength that could support the currency throughout the year. Fiscal consolidation efforts were also a key point of discussion. Boachie commended the government's revenue mobilization in surpassing expectations in the first half of the year. He praised Ghana's adherence to the IMF program, which includes maintaining spending and revenue targets, leading to positive market sentiments. However, Boachie expressed concerns about pre-election spending and its potential impact on the fiscal situation. He highlighted excessive spending as a significant risk, especially as Ghana heads into elections. Maintaining fiscal discipline remains crucial to sustain economic stability. Looking ahead, Boachie expressed confidence in the medium to long-term outlook for the Ghanaian economy, emphasizing its growth potential. Despite near-term risks related to fiscal management, he believed that Ghana is well-positioned for growth, with recent GDP growth projections exceeding expectations. In conclusion, the decision to maintain the MPR at 29 per cent reflects Ghana's commitment to addressing inflationary pressures while navigating fiscal challenges. Boachie's insights shed light on the country's economic landscape, underscoring the importance of prudent financial management and stability in the face of upcoming elections.