* Fitch says concerns growing over Ghana's macro economic
* India, Turkey South Africa all raised policy rate in
* Ghana inflation hit 3-year high in December at 13.5 pct
By Kwasi Kpodo and Matthew Mpoke Bigg
ACCRA, Feb 6 Ghana's central bank raised its
main policy rate by 2 full percentage points to 18 percent on
Thursday to curb a fall in the cedi currency and combat external
pressures, Governor Henry Kofi Wampah told a news conference.
The decision failed to alleviate the concerns of some
analysts. Fitch ratings agency said the currency's slide was a
symptom of wider macro-economic problems in Ghana, a country
with a reputation for strong growth and stable democracy.
It was the first time the Bank of Ghana has shifted its main
rate since May. But analysts, who had expected the rate hike,
saw it as a necessary but insufficient step in the right
direction given the country's fiscal problems.
Ghana is following in the footsteps of bigger emerging
markets India, Turkey and South Africa, all of whom raised
borrowing costs in January to support their currencies after the
U.S. Federal Reserve's decision to begin rolling back its bond
buying shook emerging markets.
The West African state's growth is based on exports of gold,
oil and cocoa, but import-led demand for dollars has punished
Thomson Reuters data shows the currency depreciated
nearly 20 percent in 2013 and has weakened a further 4.7 percent
so far this year.
The central bank was also under pressure to act because of
inflation, which hit a three-year high of 13.5 percent in
"The uncertainties in the outlook and weakened domestic
fundamentals underscored the need for continued tight fiscal and
monetary policies and measures that will reduce the country's
vulnerability to shocks, re-anchor inflation expectations and
sustain macro economic stability," Wampah said after an
emergency meeting of the Monetary Policy Committee.
Wampah announced a series of measures on Wednesday to
tighten foreign exchange controls.
An "initial forecast" showed that, without those measures,
Ghana would miss its 11.5 percent upper target for inflation in
2014 to land at 12 percent, he said.
"What we are trying to do with these policies ... is to
really make those cedi assets more attractive and therefore
instead of going to buy dollars you will rather buy treasury
bills, Bank of Ghana bills and so on," he said.
The Bank also wanted to stop a burgeoning black market and
the pricing of local transactions in dollars. Payment in dollars
is becoming more common for rent and in other areas as people
seek shelter from the falling cedi.
More broadly, he said the government should broaden its tax
and export base and consider renegotiating stabilization
agreements with exporters.
Some economists said the fall in the currency stemmed from
fiscal problems that the government has done too little to
correct, noting low import cover and a deficit that is
provisionally expected to stand at 10.2 percent for 2013.
"Fitch's concerns about Ghana's macro economic imbalances
are growing. You are starting to see the repercussions of loose
fiscal policy .... The current policy mix won't do anything to
right this situation," Carmen Altenkirch, director of Fitch's
sovereign group, told Reuters.
Fitch downgraded Ghana in October to a 'B' rating with a
stable outlook, saying the government was overspending.
Morgan Stanley said in a research note the Bank's measures
were drastic and might not halt a slide in the currency, which
it said is caused mainly by an imbalance of payments made worse
by fiscal policies.
Melissa Verreynne, an economist at NKC Independent
Economists in South Africa, said she was pleased the bank had
gone for a relatively large increase.
"Bold action is needed to prove to investors and traders
that the central bank is serious about addressing the impact of
the weakening cedi," she said.
Yvonne Mhango, an analyst with Renaissance Capital in South
Africa, said she did not expect the impact of the rate decision
on the currency to be significant as long as the country's
deficits remain large.