Pressure on interest and exchange rates
After the 12 May meeting of the Bank of Ghana’s monetary policy
committee, bank governor Paul Acquah announced that the prime lending
rate would remain at 18.5%. The previous upward adjustment of interest rates had drawn strong reactions from the business community, at a time when interest rates in North America, Europe and Asia have been plummeting towards zero in a bid to stimulate a return to economic growth. Tony Oteng-Gyasi, chairman of the Association of Ghana Industries, says government must “bite the bullet” and take some hard decisions in spite of the political fallout and the hardship facing the public with inflation running at over 20% per year.
The incoming government has tended to blame its predecessors for the inflationary environment, and this has put finance minister Kwabena Duffuor at odds with the BoG governor. After Duffuor blamed the bank for allowing non-residents to invest in government securities, making the local currency vulnerable to external decisions, Acquah responded that the BoG could intervene in the foreign exchange market, though it was difficult to release funds to influence the exchange rate.