Ghana set to hold rates on disinflation, as debt deal awaited

The Bank of Ghana is set to keep borrowing costs unchanged for a second straight meeting amid tame price pressures, as it awaits a debt restructuring deal with bilateral creditors.

“Ghana’s cooling inflation supports holding the policy rate at 30% in November,” said Bloomberg Africa economist Yvonne Mhango. “More than that, inflation will drop significantly this month due to a high base effect, and in so doing restore a positive real rate,” she added, referring to the inflation-adjusted interest rate.

All five economists in a Bloomberg survey also anticipate another pause.

Price pressures fell to a 14-month low in October, helped by the recent stability of the cedi against the dollar and cumulative rate increases of 16.5 percentage points since November 2021.

The monetary policy committee will also likely stand pat on rates to assess future risks to its inflation outlook, said Godfred Bokpin, a finance professor at the University of Ghana.

“Inflation may have slowed but the central bank may keep the rate due to inflationary pressures in the coming Christmas season and will continue to face headwinds until it completes the external debt restructuring,” he said.

Ghana is restructuring almost all of its $50 billion of debt to make it sustainable as a condition of a $3 billion International Monetary Fund support package granted in May.

The government has completed a revamp of its domestic loans and expects to reach a deal with bilateral creditors that would unlock $600 million from the IMF.