From 29% to 27%, the Central Bank of Ghana has reduced its key interest rate as inflation continues to ease, as announced by Ernest Addison, Governor of the Bank of Ghana—BoG, the country’s central bank, during a press conference in Accra.
The apex bank’s confidence in lowering the interest rate comes from the fact that inflation has been steadily declining for five consecutive months, falling from 25.8% in March to 20.4% in August. With a target of 13% to 17% by the end of the year, Governor Addison stated that inflation is expected to keep falling. Provided no major disruptive events occur, the BoG hopes to reach a medium-term goal of 6% to 10% by the end of 2025.
Governor Addison also highlighted that there have been improvements in the overall economy and macroeconomic conditions, creating room for this rate cut. To support the Ghanaian Cedi and control price increases, the interest rate had remained at 29% since January.
Read Also: Bank of Uganda Cuts Interest Rate by 0.25%
Q2 2024: Ghana’s Economic Growth So Far
In addition to lower inflation, Ghana’s economy grew from 4.8% in the first quarter of the year to 6.9% in the second quarter of 2024, marking the strongest economic performance in five years. The country is recovering from a debt crisis and a default in 2022, which led to borrowing a $3 billion loan from the International Monetary Fund (IMF). A default occurs when a country is unable to repay the debt it owes to other countries or organizations.
The industrial sector led this growth with an increase of 9.3%, while the agriculture and services sectors expanded by 5.4% and 5.8%, respectively. However, Ghana’s cocoa industry, which is crucial to the economy and employs about 40% of the workforce, faced challenges as cocoa production fell by 26.2% for the fourth consecutive quarter due to:
- Bad weather
- Disease outbreaks
- Shortages of supplies
- Smuggling of cocoa beans.
Upcoming Elections and the Impact of Economic Changes
The rate cut comes just before the presidential election on December 7. Vice President Mahamudu Bawumia, the ruling party’s candidate, is seen as having a tougher path to victory compared to opposition leader John Dramani Mahama. Public dissatisfaction with the economy and the high cost of living have been key issues in the election.
However, the recent rate cut and the significant decline in inflation could give some momentum to the ruling party as Ghanaians prepare to vote later this year.
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