BoG increases policy rate to 22%; cost of borrowing to shoot up significantly

The Bank of Ghana has increased the policy rate by 300 basis points to 22%, after an Emergency Monetary Policy Committee meeting today, August 17th, 2022.

The move is part of measures to address the risks to the inflation outlook.

However, cost of borrowing is expected to go up significantly, and consequently increase cost of living and doing business.

Additional measures

The MPC also took additional measures including raising the primary reserve requirement of banks from 12% to 15% to be implemented in a phased manner.

Therefore, the reserve requirement will go up to 13% from September 1st, 2022 and subsequently to 14% by October 1st, 2022 and then 15% by November 1st, 2022.

Strengthening cedi

To boost the supply of foreign exchange to the economy, the Bank of Ghana, said it 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 it believes will strengthen the central bank’s foreign exchange auctions, and consequently the cedi.

In July 2022, the MPC of the Bank of Ghana kept the policy rate at 19%, citing risks to inflation but balance to growth.