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Following the skyrocket inflation rate recorded by Ghana, the Bank of Ghana has devised measures to tame the tide by hiking the benchmark interest rate by 300 basis points. In addition to the rate hike, the central bank said it will gradually raise banks’ primary reserve requirements.

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Experts believe that aside fiscal policies, the Ghanaian government needs to reduce the number of it’s staff and curtail excess government spendings.

According to a Bloomberg report, the latest increase means Ghana’s benchmark rate has now risen by 550 basis points since November 2021. In addition to increasing the benchmark rate, the Bank of Ghana (BOG) revealed in its emergency monetary policy committee (MPC) press release that it plans gradually increase banks’ primary reserve requirement from 12 percent to 15 percent.

On the foreign exchange front, the BOG statement said measures to boost the inflow of foreign exchange will also be implemented. The statement explained:

“To boost the supply of foreign exchange to the economy, 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 export proceeds from mining, and oil and gas companies.”

By taking these steps, the BOG said it hopes to strengthen its foreign exchange auctions.

Meanwhile, the country’s president, Nana Akufo-Addo, is quoted in a VOA report apportioning the blame for Ghana’s economic woes on the Covid-19 pandemic and the Ukraine-Russia war. According to the Ghanaian President, it is these factors that are causing difficulties not just for Ghanaians but for many people around the world.

However, despite these difficulties, Akufo-Addo suggested his government is up to the task at hand.

“We are determined to bring relief to the Ghanaian people. Other steps will be taken, in particular, to deal with the unacceptable depreciation of the cedi. Reining in inflation, by bringing down food prices, is a major preoccupation of the government, and this season’s emerging, successful harvest will assist us [to] achieve this objective, together with other policies,” the president is quoted explaining.

Reacting to the BOG’s announcement, Courage Kingsley Martey, an economist with Databank Research, is quoted in the VOA report stating that the steps taken by the central bank mean there are “going to be short-term consequences or tradeoffs.”

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