BoG to increase policy rate at emergency MPC meeting to attract investors – Prof Quartey predicts

Director of the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, Professor Peter Quartey has predicted that the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) is likely to increase the policy rate of 19 per cent at its emergency meeting today Wednesday August 17.

Should that happened, he said, investors, both foreign and local, will be attracted to do business in the local economy.

Speaking on the Ghana Tonight show with Alfred Ocansey on TV3 Tuesday August 16, Prof Quartey said “certainly they will look at the economic temperature, they will look at the exchange rate depreciation, they will look at inflation expectation and may likely increase the policy rate. But should that happen, the idea is basically to mop up excess liquidity, increase in interest … that increase in the rate might attract investors both local and and foreign investors.”

The BoG is expected to hold an emergency meeting today, Wednesday, 17th August 2022.

The meeting, according to the BoG, is to review recent developments in the economy.

“The meeting will conclude with an announcement of the decisions of the Committee,” a statement said on Monday, August 15.

The regulator in an earlier statement called for calm as it has introduced measures to resolve the fall of the Cedi.

The BoG has identified five key reasons for the woes of the local currency.

These are “The strength of the US dollar, Investor reaction to Credit Rating Downgrade, Non-Roll over of Maturing Bonds, The sharp rise in crude oil prices and impact on the Oil Bill, Loss of External Financing.”

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The measures introduced to resolve these, according to the BoG, are the “Gold Purchase Program to increase foreign exchange reserves; Special Foreign Exchange Auction for the Bulk Distribution Company’s (BDCs) to help with the importation of petroleum products; Bank of Ghana is entering into a cooperation agreement with the mining companies to provide BOG with the opportunity to buy gold as when it becomes available.

“The Bank of Ghana is supporting the banking sector with foreign currency liquidity to help meet the demand for external payments. The recently approved USD750,000,000 Afriexim loan facility by Parliament, once disbursed, will boost the foreign exchange position of the country and help restore confidence.

“The Cocoa Loan is expected in the last quarter of the year. This facility will also help provide more foreign currency to help address the cedi depreciation. In the short term, we expect that when the IMF programme is finalized, it will also go a long way to help restore confidence in the economy and drive portfolio flows.”

These measures will go a long way to increase the foreign exchange reserve position of the Central Bank, a statement issued by the BoG said.

By Laud Nartey||Ghana