As the Ghanaian economy prepare to take off new measures from new administration as they await the swearing in of President Elect John Dramani Mahama on January 7, 2025, much is expected to manage inflation downwards.
To this, the International Monetary Fund (IMF) has urged the Bank of Ghana (BoG) to maintain a tight monetary policy stance given upside risks to inflation while doing more to advance the Fund’s advice on safeguards.
According to the Fund, a tight policy stance, supported by robust liquidity absorption operations, is warranted to ensure that inflationary pressures—stemming from the dry spell and the recent cedi depreciation—do not de-anchor inflation expectations while inflation gradually returns within the BoG target band.
In its country assessment of Ghana after the third review of the Economic Credit Facility programme, the Bretton Woods institution said continued progress in addressing the Fund’s safeguard assessment recommendations is needed to strengthen central bank independence and operational efficiency.
It continued that rebuilding international reserves and accelerating reforms to enhance BoG’s foreign exchange intervention framework remain key priorities under the programme.
“The overperformance of reserves accumulation targets is welcome but mainly reflects a significant expansion of the gold for reserves programme, which warrants careful management of related portfolio risks and liquidity implications. Going forward, limiting FX [foreign exchange] interventions remains key to rebuilding external buffers”.
“The BoG made welcome progress in adopting a more robust FX reference rate computation method—which would limit the occurrence of MCPs [Multiple Currency Practices]. Implementation of a formal internal FX intervention policy framework and replacement of bilateral adjudications with a transparent auction-based FX auctions—complying with MCPs policy requirements—are additional important steps to enhance the functioning of the FX market”, it added.
The Fund also called for steadfast and decisive progress in strengthening the financial sector.
It pointed out that the BoG has appropriately intensified monitoring and escalated measures to promote timely recapitalization and steps to sustain the viability of banks.
However, progress is needed on this front as well as on the phasing out of regulatory forbearances. Given the high NPLs, the Fund added that it will also be crucial to implement robust supervisory strategies to bolster credit and operational risk management.
Economy Times editorial team concur to remarks of the IMF and thereby urge the John Mahama incoming administration to put in pragmatic measures to recover the economy.
