Government should be ready to adopt other policy measures – BoG Governor

Dr Ernest Addison 480x430 1121212 Dr. Ernest Addison is Governor of Bank of Ghana

Sat, 11 Jun 2022 Source: www.ghanaweb.com

Cedi depreciates by 15.6% in first quarter of 2022

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Inflation for May jumps to 27.3%

Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has noted that the global economic crisis that countries all over the world are facing is forcing them to tighten their monetary policy rates.

According to the Governor, government, should among other things, control expenditure as new revenue mobilization measures are being generated, to revive investor confidence in the economy to attract private capital – both foreign direct investment – and portfolio investment through rule of law, and protection of property rights, transparency, and accountability.

These were contained in a statement read on behalf of the governor at a sensitization workshop for journalists.

“The rising interest rates, especially in advanced economies, and strengthening of the US dollar have led to tighter global financing conditions, leading to capital flow reversals and currency pressures in emerging and frontier economies with less buffers, including Ghana.

“Since Ghana is a market access country, the tightening of global financing conditions, together with fiscal policy challenges, led to the widening of the country’s sovereign spreads and increased the costs and risks associated with accessing international financial capital markets, resulting in a de facto closure of the international markets to Ghana,” he said.

Dr. Addison noted that these happening affected the volatility of the currency in the first quarter of 2022 causing it to depreciate by about 15.6 percent against the US dollar in March 2022.

These, the governor noted, have resulted in the hike in Ghana’s monetary policy rate by 250 basis points to 17.5 percent in March 2022, and an announcement by the government for a 20 percent cut in expenditures as well as an additional 10 percent cut in discretionary spending to support the fiscal consolidation process.

Government also announced a syndicated arrangement of US$2 billion to deal with the depreciating cedi.

“On top of this, the Bank of Ghana extended the forex forward auctions to include the Bulk Oil Distributing Companies (BDCs) as part of the measures taken by the Bank to address the FX liquidity within the local petroleum sector, minimize the uncertainty of future FX availability and aid price discovery, especially for the general pricing window within the downstream sector.

“This strategy has contributed to the relative stability observed on the forex market and, with some normalization underway, the trend is expected to continue until the local currency returns to its fundamental equilibrium level.

“Data from the Ghana Statistical Service showed that the economy has rebounded strongly from the impact of the Covid-19 pandemic, stemming largely from all the policy measures that were put in place to forestall a recession,” Dr Addison said.

Source: www.ghanaweb.com
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