The Bank of Ghana (BoG) has increased its monetary policy rate (MPR) from 19 percent to 22 percent in a bid to curb inflationary pressures and halt the depreciation of the cedi against the US dollar.
The country’s Central Bank announced the decision in a statement issued after its emergency monetary policy committee (MPC) meeting on Wednesday.
The monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.
The BOG also raised the primary reserve requirement of banks from 12 percent to 15 percent as part of efforts to mop-up excess liquidity in the banking system.
It further announced plans to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining, and oil and gas companies to help shore up FX liquidity.
“The committee decided on a 300 basis points increase in the monetary policy rate to 22 percent,” the BOG said in a statement.
“The committee also took the following additional measures: raise the primary reserve requirement of banks from 12 percent to 15 percent to be implemented in a phased manner: 13 percent from 1st September, 2022; 14 percent by 1st October, 2022; [and] 15 percent by 1st November, 2022.
“To boost the supply of foreign exchange to the economy, the Bank of Ghana is working collaboratively with the mining firms, international oil companies, and their bankers to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining, and oil and gas companies. This will strengthen the central bank’s foreign exchange auctions.”
The bank added that its ongoing policy discussions with the IMF are expected to address the underlying macroeconomic challenges, restore fiscal and debt sustainability, and provide a sustainable balance of payments cushion.