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Ghana central bank flags worse inflation outlook as it holds key rate

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Ghana central bank flags worse inflation outlook as it holds key rate By Reuters

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Published Mar 25, 2024 08:01AM ET
Updated Mar 25, 2024 10:07AM ET

© Reuters. FILE PHOTO: People walk past the Bank of Ghana in Accra, Ghana, November 28, 2018. REUTERS/Zohra Bensemra/File Photo

By Maxwell Akalaare Adombila and Christian Akorlie

ACCRA (Reuters) – Ghana’s central bank on Monday kept its main interest rate at 29%, saying the inflation outlook had worsened slightly over the past two months and required close monitoring.

The West African cocoa, gold and oil producer has been restructuring its debts as it tries to emerge from its worst economic crisis in a generation, supported by a $3 billion International Monetary Fund (IMF) programme.

Inflation rose slightly in January before slowing again in February, and central bank governor Ernest Addison told a news conference that the latest inflation forecasts showed a more elevated profile than at the last policy meeting in January.

The bank’s Monetary Policy Committee also decided to adjust the Cash Reserve Ratio (CRR) to encourage banks to lend instead of investing more money in Treasury bills.

Addison said the CRR would be set at 15% for banks with a loan-to-deposit ratio above 55%, at 20% for banks with a loan-to-deposit ratio between 40% and 55%, and at 25% for banks with a loan-to-deposit ratio below 40%.

“The banks will now be forced to do more of what banks do, which is financial intermediation and not … holding government paper,” he said.

The IMF was expected to visit Ghana for a second review of its Extended Credit Facility-backed programme in April, the governor added. If the visit is a success, the IMF’s executive board could meet to discuss the second review in May and potentially approve another loan disbursement, he said.

Addison said another $200 million loan for the country’s cocoa board, COCOBOD, was “trickling in,” put together by a consortium of cocoa buyers.

Ghana reached a deal in January to restructure $5.4 billion of loans with its official creditors. It is now pushing for a deal with holders of about $13 billion in international bonds.

Ghana central bank flags worse inflation outlook as it holds key rate

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