In its recent monetary policy statement issued after the committee held an emergency meeting held on August 17, the central bank said the depreciation of the cedi reflects factors such as budget financing, credit rating downgrades and among others.
“The US Dollar has strengthened against all major currencies. From the beginning of the year to date, the pound sterling has weakened against the US dollar by 12.4 percent while the Euro has also weakened by 11.8 percent. Countries similar to Ghana (Ghana’s peers) are all experiencing sharp depreciation to date," part of the statement read.
"The Ghana Cedi has depreciated by 25.5 percent year-to-date, reflecting the specific situation, including the challenging financing of the budget from both domestic and external sources, downgrading of sovereign credit rating, non-residents disinvestment in local currency bonds, and loss of reserve buffer,” the BoG explained.
Meanwhile, the Bank of Ghana has hiked the monetary policy rate by 300 basis points from 19 percent to 22 percent in a move to deal with current inflationary pressures.
It explained that, "Under the circumstances, and considering the risks to the inflation outlook, the Committee decided on a 300 basis points increase in the Monetary Policy Rate to 22 percent."
"The latest consumer price index release showed that the headline inflation accelerated further for the eleventh consecutive month to 31.7 percent in July 2022, from 29.8 percent in June 2022. This was driven by both food and nonfood price pressures,” the BoG added.
Ghana's food inflation increased to 32.3 percent in July 2022 from 30.7 percent in June 2022.
Similarly, non-food inflation, according to the Ghana Statistical Service also increased to 31.3 percent from 29.1 percent in June 2022, contributing 55 percent to the rise in headline inflation in July 2022.
According to the BoG, these happenings including the weakening of the Ghana cedi have pushed the economy into heightening uncertainties leading to the increase in the policy rate.
The Ghana cedi has been struggling against US dollar, other trading currencies