Ghana’s policymakers are poised to keep interest rates unchanged for a consecutive meeting to put a lid on high inflation and shore up its currency.
Most economists surveyed by Bloomberg foresee the monetary policy committee maintaining the benchmark rate at 29% when Governor Ernest Addison gives the panel’s decision later on Monday in the capital, Accra.
“I expect the Bank of Ghana to keep the policy rate on hold in May in order to bolster the cedi and prevent higher import prices from keeping inflation at the currently elevated level,” said Mark Bohlund, a senior credit research analyst at REDD Intelligence.
The cedi has lost about 10% of its value against the dollar since the MPC kept borrowing costs unchanged at its March meeting, making it the worst performing currency in the world over the period, and inflation has averaged 25%.
The cedi slide has been driven by a slump in cocoa earnings. Revenue from exports of the beans, which Ghana uses to defend the currency, fell 49% to $599 million in the first four months of this year. A mix of adverse weather, disease and a shortage of fertilizer has curbed output in the world’s second-biggest producer of the chocolate ingredient.
Bohlund and Courage Boti, an economist at Accra-based GCB Capital Ltd., predict that the MPC may be able to cut rates at its July meeting.
The currency could start to recover with a $360 million disbursement from the International Monetary Fund expected at the end of June, after the nation received a draft agreement to restructure debts with its official creditors on Thursday.
Ghana is reorganizing most of its $42.2 billion debt, as part of conditions for a $3 billion IMF program. Reaching a deal on a draft MOU was a condition to get the $360 million instalment.
Favorable base effects could also see inflation slow sharply, said Boti. “The more appropriate time to look at a rate cut will probably be July, by which time the currency pressures would have eased and its full impact assessed,” he said.