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UK-Ghana Economic Relations: Implications of UK's interest rate cuts on Ghana

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Analysts say Bank of England’s decision to reduce interest rates are likely to have a mixed impact on Ghana’s economy.

England’s Central Bank, following the country’s exit from the EU, has cut the UK’s interest rate to a record  0.25% and also announced a 227 billion dollar stimulus package.

Economic growth projections for 2017 and 2018 have also been reduced drastically, as difficult times have been projected for the UK after the Brexit Vote.

BBC’s financial analyst and reporter, Russel Padmore says the move is aimed at attracting business to take advantage of lower lending rates and hopefully borrow more money to invest in expanding business operations in the UK, thereby creating new jobs.

Mark Canny, governor of the Bank of England,  admits that economic growth will be much slower than anticipated.

“Obviously the economy is in a period of uncertainty and about to go through a period of adjustment as we move to a new relationship with the European Union. Growth is going to be considerably slower and only grow little in the second half of this year before picking up. But it will be lower than we previously expected. If we hadn’t acted,  output would have been lower, and unemployment would have been higher”, he told the BBC.

READ MORE: Abdul Nasir Issahaku 'Brexit impact too early to determine'

Meanwhile the reduction in interest rates have resulted in a depreciation of the British Pound on the currency market.

Russell Padmore adds that the effects to Ghana would in the form of reduced demand for Ghana’s oil, especially in the European Union, looking at the fact that  a big chunk of the demand for Ghana’s oil is Britain and the EU.

The price of oil is also expected to stay lower than expected. And with  as many Ghanaian businesses having  strong links with counterpart businesses in the UK, a depressed pound would affect these businesses in a good way.

Thanks to the  stability of the local currency, the inflation rate for imported items decreased to 15.2 percent in July 2016, from the 17.3 percent recorded in July 2016, while inflation for locally produced items was however 2.1 percent higher than the imported items in July.

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