ACCRA, Aug. 18 (Xinhua) -- Ghana's central bank announced an increase of 300 basis points (bps) in its benchmark policy rate to 22 percent late Wednesday to combat the ever-surging inflation and continued depreciation of the local currency.
The Bank of Ghana announced this in a statement to the press after an emergency Monetary Policy Committee meeting held earlier in the day. The adjustment came after a cumulative 550 bps hike since last November.
The statement said that the further acceleration of inflation for the eleventh consecutive month to 31.7 percent in July 2022, driven mainly by both food and non-food price increases, was a signal of inflationary pressure on the horizon.
Similarly, it said the continued depreciation of the local currency against the major traded currencies, reflected among others, a continued heightening of uncertainties in the global economy and elevated demand pressure in the foreign exchange market.
"The execution of the budget for the year has remained challenging. Revenue has not kept pace with projections and created financing challenges," said the central bank in the statement, stressing it had been aiding the government with overdrafts to bridge the financing gap.
Amid the ongoing global challenges, Ghana's specific situation worsened due to the downgrading of its sovereign credit rating by international rating agencies, nonresidents' disinvestment in local currency bonds, and loss of reserve buffers, the statement said.
The central bank announced additional measures to complement the policy rate hike, including an increase in the primary reserve requirement of banks from 12 percent to 15 percent to be implemented in a phased manner from September to November.
"The Bank of Ghana is working collaboratively with the mining firms, international oil companies, and their bankers to purchase all foreign exchange arising from the voluntary repatriation of their export proceeds to boost the supply of foreign exchange to the economy," added the statement.
