On state of Ghana’s Economy
After remaining in the quiet for 120 days since its last meeting with the press on October 28, 2008, the Bank of Ghana (BoG) will on Tuesday, February 24, 2009 present its independent assessment of developments in the country’s economy.
The move is expected to restore investor and consumer confidence that has waned in recent times owing to uncertainties surrounding the true state of Ghana’s economy fuelled by recent political developments.
The findings of the central bank are also expected to inform policy makers on what policy directions to pursue this early quarter to salvage what has been described as “the declining fortunes of the domestic economy”.
The delay in the Monetary Policy Committee (MPC) meetings, analysts have noted, had given way to widespread speculations about the country’s current fiscal and monetary standing, and inflationary expectations, for which reason banks continue to raise their lending rates indiscriminately. The hikes in borrowing rates, coupled with a constantly depreciating local currency are reported to be hitting local businesses hard, especially those with high import bills.
In an interview with this reporter last Friday, Ms Esi Hammond, Public Relations Director of BoG, explained that the delay in the sitting of the MPC had not been deliberate, but had been caused by the current state of affairs.
She pointed out that the central bank has been working and has not been in any way distracted by the political tensions that characterised the recent elections.
“The MPC has been working within its mandate and had to wait for data from the statistics office, for government’s projections and programmes for the coming months, and these had delayed a little due to the transition”, she said.
A former central banker who had worked with the institution for over thirty years however expressed contrary views with regard to the long silence on the part of the monetary authority at a time many yearned to hear about the country’s economic assessment.
The banking magnate, who pleaded anonymity, stated that the bank’s pedigree as an independent institution, free of political manipulation has clearly been at stake over the past two months.
“The bank had had to take the difficult decision of kicking away an illustrious employee who served on several committees for his involvement in a major political contest. “Relieving Dr Mahamudu Bawumia of his post as a Deputy Governor was crucial for the bank to live up to its billing as an independent body”, he stressed.
He continued by saying that, “Whilst dealing with this internal challenge, the debate over whether the economy is broke or not also came up strongly creating serious problems for managers of monetary policy”.
According to the former central bank official, any comment by the Bank of Ghana at the time would have been interpreted to mean a support for one of the factions.
He commended the Governor and his team for keeping their acts together during those challenging moments.
The BoG Act 2002, Act 612 grants the bank operational independence in the conduct of monetary policy aimed at ensuring basically price stability. To enhance the management of monetary policy, the Act provides for the establishment of a Monetary Policy Committee (MPC), comprising five representatives of the central bank and two nominees of the Government.
The committee normally meets for a three day period every other month, or six times per year, during which a wide range of economic indicators are presented and carefully analysed.
The MPC later presents detailed assessment of developments in the economy to the public which keeps them well informed, and therefore anchors their expectations.
The bank’s inflation targeting policy framework which it formerly adopted on May 21, 2007 has worked to minimize the problem of inflation bias that arises under economic agents’ uncertainty concerning the credibility of the central bank’s commitment.
