Understanding the monetary policy landscape in Ghana & Angola

The monetary policy landscape in Ghana and Angola has been a topic of interest, with both countries facing unique economic challenges and implementing different strategies to address them. Karen Kwarteng, Head of Global Market Sales at Stanbic Bank Ghana, provided insights into the monetary policies of both nations in a recent interview on CNBC Africa. Starting with Angola, the country experienced a shift in its monetary policy stance from a rate cut earlier in the year to a tightening stance later on. The Bank of Angola raised its policy rate by 100 basis points to 18% due to inflationary pressures and increased the cash reserve ratio, signaling credit tightening in the market. Inflation in Angola currently sits at 16.6%, with food prices and other items in the CPI basket contributing to the rise. Standard Bank projects that BNA may need to further hike rates by 200 basis points next year to address inflation. On the other hand, Ghana has followed a different path, focusing on inflation fighting. The country increased its policy rate by 2,000 basis points from 28% to 30% throughout the year. Despite external shocks and global inflationary trends, Ghana maintained its policy rate at the last meeting to anchor inflation on a downward trajectory. Inflation in Ghana has been on a decline, with October figures showing a decrease to 35.2% from 38.1% in September, driven by lower food inflation. The interview also touched on the broader sub-Saharan African monetary policy landscape, comparing it to developed markets. In sub-Saharan Africa, there seems to be a disconnect between monetary and fiscal policies, hindering the cooling off of consumer prices. The need for synergy between fiscal and monetary authorities was emphasized, with examples from Ghana showcasing how liquidity management and coordination between regulators and government can impact market dynamics. Karen Kwarteng highlighted the importance of alignment between fiscal and monetary policies to achieve price stability. She pointed out that in Ghana, the recent increase in the cash reserve ratio led to undersubscription in Treasury bill auctions, indicating a shift in market behavior due to liquidity management strategies. The call for synergy between authorities to facilitate price cooling in the consumer basket was echoed throughout the discussion. As sub-Saharan African countries like Ghana and Angola navigate their monetary policy landscapes, the need for coordinated efforts between fiscal and monetary authorities remains crucial. Understanding and addressing the unique economic challenges each country faces will be key to fostering stability and growth in the region.