ACCRA, June 30, (Reuters) – The Bank of Ghana is raising its its cash reserve ratio from 8 percent to 9 percent with effect from July 1, central bank sources said on Friday. “What this means is that the commercial banks will have to keep that much more of their deposits with the central bank,” one source told Reuters.
Financial analysts said the aim was to check inflation and to help stem the fall of the West African nation’s cedi currency against the U.S. dollar and other currencies.
The government, which has set a 12.5 percent inflation target for the end of the year, is keen to mop up liquidity in the money market. Inflation in May was 18.7 percent.
Germa Bergashaw, representative of the International Monetary Fund in Ghana, said that the aim was also to bolster the cedi “by reducing the amount of cash available to buy dollars and pounds.”
The cedi has fallen by at least 50 percent in 2000.
Some analysts expressed concern about the impact on the private sector.
“What’s going to happen to a totally starved private sector and the capital markets?” R. Yofi Grant, executive director of Databank Brokerage, asked.
Interest rates are near 50 percent and 90-day Treasury Bills attract 43.8 percent, up from 35.29 a month ago.
“Why would anyone want to expand his manufacturing industry when he can make money buying treasury bills?” Yofi Grant asked.
