ACCRA, May 23 (Reuters) - Ghana's central bank on Monday
raised its main interest rate by 200 basis points
to 19% to curb inflationary pressures and promote macroeconomic
stability, Governor Ernest Addison said.
In March the Bank of Ghana raised its policy rate by 250
basis points to 17% - the largest hike in its history - to stem
runaway inflation in one of West Africa's more prosperous
nations as the government cut spending to reduce the budget
deficit and save a sliding local currency.
But in April the consumer inflation rate in the gold, oil
and cocoa producer hit an 18-year high of 23.6%.
"The committee took the view that it needed to decisively
address the current inflationary pressures to re-anchor
expectations and help foster macroeconomic stability," Addison
told a press briefing in the capital Accra.
The rapid depreciation of Ghana's cedi has slowed but the
currency has still lost over a quarter of its value since the
Capital outflows have entirely offset a $1.3 billion trade
surplus gained from a 61% jump in crude oil export revenues in
the first quarter.
Addison said that had created an overall balance of payments
deficit of $934.5 million in the first quarter compared with
$429.9 million in the same period last year.
Although the jump in April inflation was mainly driven by
transport costs, prices rose for more than 96% of surveyed
items, meaning most Ghanaians are feeling the pinch.
Central bank forecasts show a "prolonged horizon" for
inflation to return to its target band, Addison said.
Finance Minister Ken Ofori-Atta had said another hike would
be a "knee-jerk reaction" to mostly imported inflation, making
it hard for the government to service its domestic debt.
Addison said the total public debt stood around 78% of gross
domestic product and that Ghana had been unable to access
capital markets since Fitch and Moody's both downgraded its
sovereign credit rating earlier this year.
Although one analyst called Monday's rate increase a "bold
move," it remains to be seen how broadly recent hikes will
bolster investor confidence. Ghanaian benchmark bond yields have
risen to 5-year highs since the beginning of May.
The benchmark 10-year treasury note yield rose to 25.913% on
Monday, up from 24.625% at the end of last week.
"While there was at least a further tightening, by our
calculations, the policy rate is likely to remain
negative for some time," said Razia Khan, Standard Chartered's
chief economist for Africa and the Middle East.
(Reporting by Christian Akorlie and Cooper Inveen; Additional
Reporting by Rachel Savage; Editing by Sofia Christensen, Hugh
Lawson and Emelia Sithole-Matarise)