During Wednesday’s emergency meeting, Ghana’s Central Bank increased its interest rate by 300 basis points to 22%. The committee was initially set to meet in September but agreed that an emergency meeting was necessary.
Ghana is not the only country to make record-breaking interest rate hikes. Similar increases have been noted in the European Central Bank, England, Hungary, Brazil, Mexico, South Africa, and more.
Consumer inflation in the country surged for the eleventh month in a row and reached 31.7% in July. The monetary policy rate increase is an effort to help Ghana’s ongoing fight against rising inflation and the cedi continually losing value as the second weakest currency globally. The cedi has lost over 25% in its value in 2022.
The Bank of Ghana confirmed in its press release that they are now working with the International Monetary Fund to develop a support deal. The Bank’s committee also announced that the Bank would be gradually increasing the primary reserve requirement of banks from 12% to 15%.
The Bank of Ghana claims that these changes will make the foreign exchange auctions of the Central Bank stronger “…in order 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 its bankers to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining, and oil and gas companies.”
The rate increase took place a few weeks after the Central Bank had left the rate untouched for the first time since November at 19%.