Ghana central bank cuts policy rate as inflation eases Reuters via

© 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 lowered its main interest rate by 100 basis points to 29% on Monday, its first rate cut since 2021, after inflation fell for the fifth consecutive month in December.

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 that saw inflation rocket beyond 50% in annual terms in late 2022.

But price pressures eased considerably over the second half of 2023, falling to 23.2% year-on-year in December from 26.4% in November and 35.2% in October.

Bank of Ghana Governor Ernest Addison told a news conference that bank officials now forecast inflation would drop to 13%-17% by the end of the year and to 6%-10% by 2025.

The central bank targets inflation of 8% with a margin of error of 2 percentage points either side.

“Several factors have supported the disinflation process, namely, the tightening monetary policy stance throughout 2023, favourable international prices which led to stable ex-pump prices and transportation costs, and relative stability in the exchange rate,” Addison said on Monday.

He said there was still a need to maintain a strong policy stance.

Ghana’s government earlier this month reached a milestone in its quest for debt relief when it agreed a deal to restructure $5.4 billion of loans with its official creditors.

Following the agreement, the International Monetary Fund allowed an immediate disbursement of about $600 million under its $3 billion bailout programme and the World Bank approved $300 million in financing.

Ghana, which defaulted on most external debt in December 2022 after servicing costs soared, also wants to reach a relief deal with holders of about $13 billion in international bonds.