Ghana sustains 14.5% interest rate for sixth consecutive time

Zainab Iwayemi

The monetary policy committee, Ghana has again maintained a 14.5 percent interest rate, marking the sixth consecutive time since monitoring the impact of the new tax measure on inflation. This was contained in a statement released by the central bank of Ghana on Monday.

According to the statement, the Bank of Ghana revealed that it expects the rate of price growth to bounce back in the second quarter of this year.

In the past year, the nation has surpassed the central bank’s target range of 6 percent to 10 percent on the back of a surge in food prices as a result of supply constraints caused by restrictions to curb the spread of the coronavirus.

In the statement, the MPC noted the need to closely monitor the fluctuation of oil price and revenue measures. “Risks to inflation in the near-term are broadly balanced, but there are emerging short-term pressures emanating from the rising crude oil prices and the direct and secondary price effects of the revenue measures announced in the 2021 budget. Monetary policy would need to remain vigilant to monitor these risks”

As a measure to reduce the fiscal gap that reached 11.7, the government, in 2020, rolled out new tax measures to ease price-growth pressures as well as suppressing the need for the central bank to follow emerging-market peers with tightening policy. Despite this, the West African nation has minimal fiscal space and would likely depend on interest rates to attract capital to fill up its budget deficit projected to drop below the legislated threshold of 5 percent of GDP by 2024.

The third quarter of 2020 saw the economy of the world’s second-largest cocoa producer slipped into a recession due to restrictions in many economic activities. However, as normalcy is gradually returning, the government expects GDP to expand 5 percent this year.

Meanwhile, the central bank revealed that a survey conducted in February shows some softening of both consumer and business sentiment while the drop in confidence depicts a rising concern  on the potential return of restrictions as a result of the upsurge in Covid-19 cases in the first two months of the year.