Central Bank governor downplays Fitch's recent downgrade of Ghana’s outlook

Central Bank governor downplays Fitch's recent downgrade of Ghana’s outlook from stable to negative while maintaining the key policy interest rate at 18%.

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.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2014 Menas Associates

President Mahama urges Bank of Ghana to reduce interest rates

 

President John Mahama , who was swearing-in the Bank of Ghana's new governor, Dr Henry Kofi Wampah, urged the bank to reduce interest rates, return inflation to single digits and stem the dollarisation of goods and services.

At the 4 April swearing-in ceremony, President Mahama declared the government's determination to work with the governor to reduce interest rates and make the cost of borrowing easier for the private sector. He said, “The cedi remains relatively stable, but we need to do more to ensure that we protect that stability so that the cedi operates in a predictable manner both in the interest of the economy and for foreign investors.” He went on to say, “We must continue to index prices in the Ghana cedi. The dollar and other foreign currencies are a means of international exchange and trade, and are not supposed to be the indicator of what currency prices we have.”

Dr Wampah pledged to consolidate present gains and accelerate Ghana's transition to higher middle-income status. Wampah has been the acting governor since former governor and current Vice President Kwesi Amissah-Arthur joined Mahama as his running mate for the 2012 election campaign.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2013 Menas Associates