Ghana’s New Central Bank Boss Seen Cutting Rates for Growth


by Ekow Dontoh and Andre Janse Van Vuuren

  • April inflation rate near the lowest level since 2013
  • Government has announced tax breaks to help to boost output

Ghana’s new central bank governor, Ernest Addison, is likely to cut interest rates to an almost two-year low in his debut decision.

The former African Development Bank economist, in office since the end of March, has room to act on Monday after the inflation rate fell from a record and the currency stabilized. That would extend an easing cycle started by former Governor Abdul Nashiru Issahaku, who cut borrowing costs at two of the six monetary policy committee meetings that he led.

Addison may be more aggressive than his predecessor as the new administration of President Nana Akufo-Addo seeks to boost economic growth, which slowed to the most sluggish pace in 26 years in 2016. His appointment completed an overhaul of the top fiscal and monetary policy makers in West Africa’s second-largest economy.

“The governor was appointed by this government and shares the same ideology of private sector-led growth,” Eliezer Fummey, a research analyst at NDK Capital Ltd. in Accra, said by phone. “He will focus more on strong growth leading to rate cuts to encourage lending.”
Research Head

Addison was head of research at the central bank from 2003 to 2011, a period during which the regulator more than halved its key policy rate.

Five of the eight economists surveyed by Bloomberg forecast a reduction of 50 to 200 basis points. The others predict the key rate will stay unchanged at 23.5 percent. Issahaku reduced borrowing costs by 50 basis points in November and a further 200 in March.

Inflation was 13 percent in April, near the lowest rate since 2013, compared with a peak of 19.2 percent last March when the cedi was weakening. While the rate still exceeds the central bank’s target of 6 percent to 10 percent, Addison said last month it’s on track to meet a shorter-term goal of 11.2 percent by the end of the year.

Still, some economists think he will proceed at a slower pace.

“I will expect that we proceed with caution given that a sharper-than-expected reduction was done only two months ago,” Courage Martey, an Accra-based economist at Databank Group, said by phone. “It is important for policy makers to play it safe.”
Tax Breaks

While the cedi has recovered from a record low in March, when markets were startled by the discovery of previously unknown government spending, the currency is still 5.2 percent weaker against the dollar since the start of the year. Finance Minister Ken Ofori-Atta announced tax breaks and increased state spending in his budget as part of plans to support private sector-led growth and create jobs.

“Governor Addison and MPC members are concerned about growth, especially since inflation is not under significant pressure any more,” Celeste Fauconnier, an analyst at FirstRand Ltd.’s Johannesburg-based Rand Merchant Bank unit, said in an emailed response to questions. “Therefore, more aggressive cuts can be expected from the new governor compared to Issahaku.”


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