Halt policy rate hike amid economic downgrades - Economist advises BoG

Theo Acheampong  Economist Economist, Dr. Theo Acheampong

Fri, 12 Aug 2022 Source: www.ghanaweb.com

Economist, Dr. Theo Acheampong, has asked the government to take pragmatic steps to revive the country’s ailing economy.

His comment comes on the back of recent economic downgrades by rating agencies, S & P and Fitch.

In a Facebook post on August 11, the economist advised the Bank of Ghana against policy rate hikes, warning that it will strangle the economy.

He advised that the government should rather desist from borrowing from the local market as well as expedite the programme it wants to receive from the International Monetary Fund while seeking to halt debts repayments.

He further called for a reshuffle which will cut down on the number of ministers.

“With two almost junk status sovereign downgrades in the space of a week by S&P and Fitch, and with inflation also at an unprecedented 32%, any further attempts by the Bank of Ghana to hike the policy rate in an attempt to control inflation will likely strangle the economy by making the cost of credit extraordinarily high for businesses and households.

“The government faces a difficult choice. However, it must signal to the market that it is serious about turning the tide. First, it starts by reducing the government's resort to borrowing from the domestic market using T-bills and other central bank open market operations to compensate for the lack of access to the international capital markets.

“Secondly, the IMF programme must be fast-tracked with an application to the G20 debt framework to delay some debt repayments in order to create much-needed spending space. “Thirdly, cutting down the government's size through a reshuffle to remove many of the deadwood. Mr President, you don't need to tell Ghanaians that your ministers are "outstanding". We'd know it if it was improving our bottom line. Unfortunately, it is not,” he wrote on his page.

The government is placing its hopes on International Monetary Fund (IMF) to secure a financial programme following a recent economic downturn.

The country is said to be targeting an amount of $3 billion over a three-year period once an agreement on a programme is reached.

This is according to international news agency, Bloomberg.

The portal reported on its website that the new amount requested as a loan was double the government’s initial target of $1.5 billion.

Meanwhile, pressure has been mounting on President Akufo-Addo following the performance of the economy to reshuffle his ministers and sack some particularly Finance Minister, Ken Ofori-Atta.

However, the president while speaking on North Star FM in Tamale on August 8 stated that he is the final authority to determine whether or not a minister should be sacked during a reshuffle.

He said calls for reshuffle were from the opposition NDC who wanted to destabilize his government.

“The calls come for all kinds of reasons; NDC wanting to destabilize the government is one. There are people who are also looking for jobs,” he said.

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Source: www.ghanaweb.com
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