Pressure on interest and exchange rates

By Kwabena Mensah

Posted on Monday, 25 May 2009 08:38

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.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options