A Senior Lecturer at the Department of Economics, University of Ghana, Dr. Eric Osei-Assibey has advocated for a review into the Bank of Ghana (BoG) inflation targeting policy after a decade of its adoption.
According to the Economist, the monetary policy framework put in place by the Central Bank to regulate the country’s borrowing and expenditure rates has not strengthened the economic structure in any way but adversely taken a tow on its development.
Dr. Osei-Assibey argues that inflation targeting in the midst of persistent over-expenditures, exchange rate fluctuations and weak productive structures has resulted in high interest rates of the country.
In his view, inflation targeting under a weak macro-economy like Ghana will be impossible unless the reasons for the numerous target misses of the Central Bank is rectified and a re-direction is put in place.
“In an a economy where you have so much structural weakness and as I quoted an IMF’s own paper, where the fundamentals are severely lacking inflation target may not be …There are other alternatives, other countries, even in our West African countries let’s look at interest rates, our interest rate is one of the highest and interest rate is the macro variable that connects the real sector. If you want your real sector to do well it’s through your interest rates, he posited.
Speaking at a roundtable discussion on Ghana’s inflation targeting and macroeconomic fundamentals, Dr. Osei-Assibey maintained that, “very soon utility bills and commodity prices are going to go up and the central bank will be forced to raise the monetary policy rate and that will mean that the interest rate that we are all yearning that it comes down will have to go up again.”
Ghanaweb
