Bank of Ghana (BoG) governor, Dr Henry Kofi Wampah, told reporters in Accra that Fitch's assessment is shallow and too narrowly focused on long-term prospects and that it ignores the more positive outlook for the short and medium term. Answering questions from journalists following Fitch’s latest decision he said he also disagreed with its prediction of a 20% depreciation of the cedi in 2014.
Last week, the BoG maintained its policy interest rate at 18% following a 200 basis point adjustment in a bid to halt the decline of the local currency, on the grounds that the government's recent monetary policies had yet to make their impact felt.
Analysts argue that, given current investor concerns about the fiscal outlook, it is unlikely that further raising interest rates will do much to attract new inflows and an increase in the policy rate would negatively affect the government’s debt-servicing costs and GDP growth.
The Central Bank has also raised bank reserve requirement to 11 per cent from 9 per cent in a bid to stem the cedi’s fall and rein in inflation, a move which, according to some, would not prevent the local currency from further depreciating but would only increase short-term interest rates.
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