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Bank of Ghana urged to perform creditably

Tue, 10 Sep 2002 Source:  

President John Agyekum Kufuor on Monday asked the Bank of Ghana (BOG) to discharge its responsibilities creditably to win the confidence of the government, business community and citizens.

He said this required the building of quality data to support monetary policy decisions and the development of indicators that were essential for efficiency and transparency. "The staff will have to display professionalism and a high and responsible sense of national purpose."

The President was inaugurating a seven-member Monetary Policy Committee (MPC) of the Central Bank. The committee, headed by Dr Paul A. Acquah, Governor of the BOG, would have the freedom to formulate monetary policy and set interest rates as appropriate to prevailing economic conditions. President Kufuor observed that in the past, government over interference in the management of the monetary policy led to hyperinflation, budget deficits and general economic instability.

This, he said, undermined good accounting practices and generated economic malaise and political instability in the country. "It is generally agreed, therefore, that it is time to put a stop to this self serving, short-term approach that has bedevilled the economy, subverted all economic development efforts and put off investors," the President said.

President Kufuor noted that with the establishment of the MPC, the BOG's authority and autonomy to pursue policies geared towards currency and price stability had been put beyond doubt, saying that the Bank's work was clearly cut out for it.

He said it must not feel hampered in pursuit of its responsibility to achieve price stability, help reduce inflation, promote macroeconomic and exchange rate stability and enhance the development of the local capital market, where the private sector could borrow more efficiently and cheaply in the long run.

The President Kufuor urged the Bank to "seriously consider the possibility of establishing off-shore banking...to augment the scope of its activities." He, however, cautioned the Bank to be flexible and proactive, saying that a successful Central Bank was not the one that adopted rigid and theoretical stance on the independence given it by the law. "A better Central Bank is one, which recognises the political and economic reality in the management of the monetary policy," he said.

"Money cannot be managed in the vacuum. Flexibility should be the watchword and there is the need for constant and functional consultation between the Bank and the Fiscal and Executive authorities of the state." President Kufuor asked the MPC to hold the vision of the government in view in discharging its duties, saying that after all, the measure of a sound monetary policy was only as good as the extent to which it helped to strengthen a politically and economically stable and thriving state.

Mr Yaw Osafo Maafo, Minister of Finance, said the government's medium-term strategy to reduce the burden of inflation and interest rates that was geared towards steering the economy to stability was on course.

He said these were to create an enabling environment for the private sector to operate efficiently. The Finance Minister said the BOG Act 612, which gave it an independent status, was laudable because it was only an independent Central Bank that could assist the government to work and come out with credible fiscal and monetary policy.

He said government would not interfere with the operations of the Bank but would provide it with the needed assistance to work efficiently as an independent body, adding; "we are committed to an independent Central Bank". Dr Paul A. Acquah, Governor of BOG, said currently the Gross Domestic Product (GDP) of Ghana was about 47 billion cedis (about 5.8 billion dollars), which fits a typical small economy model but come with several practical complications.

He noted that commodity imports accounted for 50 per cent of GDP...and taxes related to international trade accounted for 23 per cent of government revenue whilst cocoa and gold accounted for 60 per cent of export earnings, which had seasonal inflows. These, among other factors, such as the liberal fiscal policy situation, he said exposed the economy to recurring shocks and cyclical swings in international commodity markets. "It is in this setting that monetary policy has to be conducted in promoting stabilization goals," he said.

Dr Acquah, however, noted that for macro-economic stability to be achieved, "simply put, monetary and fiscal policies must work hand in hand." He gave the assurance to President Kufuor that the BOG was in strong contact with Central Banks around the world and intended to draw from their experience and expertise to make economic stability a reality in Ghana. Other members of the MPC are Mr Emmanuel Asiedu-Mante, First Deputy Governor of BOG, Mr Lionel Van Lare Dosoo, Second Deputy Governor of BOG, Mr Kassim Yahya, Director of Research Department, BOG, Mr Millison Narh, Director, Banking Department, BOG, Dr Nii Kwaku Sowa, Core Research Fellow, Centre for Policy Analysis (CEPA) and Dr. B. Armah, Head of Economic Unit, Institute of Economic Affairs (IEA).

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