Finance expert at the University of Ghana, Professor Godfred Bokpin, has urged the Bank of Ghana (BoG) to implement medium-to-long-term strategies aimed at sustaining Ghana’s macroeconomic stability and bolstering market confidence.
These measures, according to him, should go beyond the current US$3 billion loan-support program with the International Monetary Fund (IMF) to ensure the long-term stability of the Cedi against the dollar and to keep inflation within a range conducive to economic growth and stability.
His recommendation comes in light of recent efforts to contain the depreciation of the Cedi against the Dollar and to manage inflation.
While acknowledging the Central Bank’s role in the country’s economic recovery, Professor Bokpin emphasized that the macroeconomic progress observed thus far is not sufficiently robust.
Prior to obtaining the IMF loan-support program, Ghana’s inflation rate stood at 54.1 percent in December 2022, decreased to 23.2 percent in December 2023, and then rose to 25.8 percent by March 2024.
President Nana Addo Dankwa Akufo-Addo revealed in his February 2024 State of the Nation address that the Cedi had experienced a cumulative depreciation of nine percent between February and December 2023.
However, Professor Bokpin emphasised the need for the Central Bank to engage in introspection and develop a medium-to-long-term strategy to ensure macroeconomic credibility and trust beyond reliance on an IMF program.
“The gains made so far are quite fragile, so we must work hard to consolidate them beyond the expiration of the IMF programme by being disciplined and efficient with our expenditures as we’re in an election year,” he recommended.
Prof. Bokpin also called for structural reforms that would guarantee the independence of the Central Bank, citing cases where the Bank opposed some government decisions yet had to succumb to government pressure.
“From the COVID-19 pandemic era, the pronouncement of the Governor showed signals to the market that he was not happy with the way the fiscal side was intruding into the monetary side of the economy, but he succumbed to that political cannibalization,” he said.
He also stated that the Central Bank expressed a strong disapproval of the haircut under the Domestic Debt Exchange Programme (DDEP) and fought against it during the 2023 spring meetings.
Nonetheless, the Bank had no choice but to sacrifice its balance sheet, leading to the BoG suffering a 50 percent haircut on the government’s debt, something the Bank said it did “to save the economy from collapsing.”.
“The Central Bank must be bold in saying that the fiscal side is messing us up; when they admit and speak truth to power, without fearing that they’ll be fired, this country will begin to have a turn for good,” Prof. Bokpin said.