The Bank of Ghana will continue its policy rate hiking cycle, increasing the benchmark interest rate to 27% by the end of 2023.

According to international research institution, Fitch Solutions, this it believes will bring real rates into positive territory.

“We expect that this will bring real rates into positive territory, stimulating capital inflows and providing support to the exchange rate, which will allow the cedi to depreciate at a slower pace over 2023”.

Given a high inflation, Fitch Solutions, stressed that it expects the Bank of Ghana to tighten monetary policy as a condition of the International Monetary Fund deal.

“Given that we expect inflation to remain high, we expect that Ghana would have to tighten monetary policy as a condition of the IMF deal”.

However, this expectation is based on a scenario that Ghana will reach a deal with the IMF for a programme by the first quarter of next year.

So far this year, the Bank of Ghana has increased the policy rate by a record 10% to 24.50%. The Monetary Policy Committee of the Bank of Ghana is expected to commence its quarterly review of developments in the economy from tomorrow November 22, 2022.

Under these circumstances, Fitch Solutions expects political risk to remain contained, reassuring foreign investors.

“While we expect to see an uptick in protests against austerity measures that would likely be implemented under an IMF programme, we do not believe they will threaten the overall stability of the government. This is factored into our Short-Term Political Risk Index, in which Ghana scores 62.0 out of 100 (a higher score implies lower risk), above the Sub-Saharan African average of 50.3.

“In this scenario, we would not expect to see capital flight related to political instability, limiting downside risks to the exchange rate”, it added.

Source: myjoyonline.com