The World Bank has praised the Bank of Ghana for its independence, which has been crucial in the success of various policy reforms aimed at mitigating inflationary pressures on the Ghanaian economy.
This acknowledgment was featured in the World Bank’s most recent Country Policy and Institutional Assessment (CPIA) report, titled ‘CPIA Africa 2024: Structural Reforms for a Vibrant Private Sector.’
The report noted that the Ghanaian government, in conjunction with the Bank of Ghana and other governments and central banks across sub-Saharan Africa, has effectively shifted from managing global shocks to strengthening credibility, capacity, and transparency.
“A reflection of this is the region’s strong performance across multiple measures of Central Bank independence – an institutional provision that improves countries’ ability to reduce inflation and can improve investors’ perception of risks,” the CPIA report stated.
The World Bank highlighted that Ghana’s dedication to policy reforms aimed at enhancing the central bank’s independence has enabled the Bank of Ghana to pursue a stringent monetary policy.
This approach involved increasing reserve ratios and executing a fiscal reform program, which effectively decreased year-over-year inflation from 54% in December 2022 to 23% in December 2023.
The report emphasized, “Ghana’s reforms around central bank independence were complemented by halting monetary financing of the deficit, which contributed to curbing inflation from over 50% in 2022 to 23.2% in December 2023.”
The CPIA also reported that the average score for monetary and exchange rate policies in the region rose to 3.4 in 2023, with notable improvements in the scores of six countries, including Ghana, Mauritania, Nigeria, Somalia, and Zambia.
Regarding fiscal transparency and responsibility, the report recognized Ghana’s efforts to reintroduce its fiscal rule for the medium term and to enhance the independence of its Fiscal Council. This initiative aims to bolster the credibility of the council’s macro-fiscal assumptions and adherence to the fiscal rule.
The CPIA functions as an annual assessment tool for countries eligible for funding from the International Development Association (IDA), the World Bank’s branch dedicated to supporting the world’s poorest nations.
Andrew Dabalen, World Bank Chief Economist for Africa, remarked, “the CPIA review offers a chance to identify areas of relative weakness and engage in a dialogue around policy reforms that can produce better development outcomes.”
The 2024 CPIA report strongly underscores the importance of attracting and maintaining increased private sector investment.
“Private sector investments will need to pick up after years of investment growth coming from the public sector. High interest rates and public debt mean that the public sector can’t continue to do the heavy lifting, but there are huge opportunities around trade and the digital economy,” said Nicholas Woolley, the CPIA report’s main author.
As Ghana advances with these reforms, the World Bank’s recognition highlights the crucial role of upholding central bank independence and fiscal responsibility for achieving long-term economic growth and stability.