“Ghana may take measures to mitigate any adverse effects and adapt to changing global economic conditions. However, changes in global interest rates, including those set by major central banks like the ECB, can have several potential impacts on the Ghanaian economy.”

A statement signed by Mr. Selasi Koffi Ackom, Chief Executive Officer of GITFiC and copied to the Ghana News Agency in Accra said the European Central Bank raised its key interest rate to a record high of 4 per cent on Thursday, 14 September, 2023 but, with a strong signal that the hike, its 10th in a 14-month-long fight against inflation, was likely to be its last”.

“The ECB (European Central Bank) raising its MPR (Monetary Policy Rate) typically has a less cascading effect on the Ghanaian economy, on the basis that, Ghana is not part of the Eurozone and does not directly use the Euro as its currency.

“It is important to note that the impact of ECB rate hike on the Ghanaian economy depends on various factors, including the state of the global economy, Ghana’s economic fundamentals, and its trade relationships”.

On exchange rates it said an increase in the ECB’s MPR will lead to a stronger Euro, which may affect the exchange rate between the Euro and the Ghanaian Cedi. A stronger Euro could make Ghanaian exports more expensive for Eurozone countries, potentially reducing demand for Ghanaian goods and services vis a vis balance of payment.

The statement said higher interest rates in the Eurozone could attract capital flows from investors seeking better returns, which could reduce the availability of foreign investment in Ghana or lead to capital outflows from the country and could affect Ghana’s balance of payments and currency stability.

“Ghana is a major exporter of commodities like cocoa, gold, and oil. Changes in global interest rates can influence commodity prices. A higher ECB rates would lead to a stronger Euro and weaker demand from Eurozone countries. This may affect the prices Ghana receives for its exports. Currently, EU’s imports from Ghana in 2022 alone stood at $2.4billion. Also, EU’s exports to Ghana in 2022 stood at $3.9billion leaving a trade deficit in favor of Europe at $1.5billion”.

It said If Ghana had outstanding debt denominated in Euros or other foreign currencies, higher MPR could lead to higher servicing costs for that debt, potentially impacting the country’s fiscal position.

On inflation, the statement said changes in exchange rates and capital flows could affect domestic inflation in Ghana.

“A depreciating Cedi can contribute to imported inflation if the cost of imports rises, which can have implications for the domestic cost of living”