Economist Professor Godfred Alufar Bokpin has dismissed options that the latest strengthening of the cedi is a mere blip.
He, nonetheless, warns that with out deeper structural reforms and a transparent stabilisation coverage, the positive factors could not final.
“This isn’t unintended,” he mentioned. “From the 2025 price range, you possibly can clearly see that the federal government supposed to stabilise an overheated economic system.”
He credited latest enhancements to what he referred to as “shock remedy”—fiscal self-discipline and tight financial coverage working in tandem.
“There’s coordination occurring between the Finance Ministry and the Financial institution of Ghana. You’ll be able to see it. The Minister of Finance and the Governor deserve commendation for that,” Bokpin mentioned.
He cited expenditure-based fiscal consolidation as a core motive for the rally, noting that “as soon as authorities is just not spending, there isn’t a substantial injection of liquidity into the economic system.”
He added that even nominal will increase within the 2025 price range have been far beneath Ghana’s inflation fee and that “throughout ministries, departments, and businesses, the spending is low—and that’s verifiable.”
From the financial aspect, he pointed to a tightening stance. “The MPC elevated the coverage fee by 100 foundation factors. There’s additionally enhanced sterilisation, mopping up extra liquidity,” he mentioned.
However regardless of the technical wins, he sounded a powerful warning. “There are considerations about sustainability. Sure, this rally is actual, however can it maintain?”
He defined that a part of the latest positive factors stemmed from “beneficial timing” because the nation benefited from improved FX flows—gold, cocoa, and remittances—at a time of weak import demand.
“The economic system’s money absorption capability is restricted, and demand is subdued. That provides the central financial institution the higher hand to intervene with even modest injections.”
Nonetheless, Prof Bokpin warned of the dangers in relying an excessive amount of on trade fee administration to battle inflation.
“I think the central financial institution is utilizing the trade fee to carry inflation down. However what’s the true drawback? Since November 2023, inflation on regionally produced items has been larger than imported inflation. Dragging the trade fee down simply makes imports cheaper. It doesn’t repair the structural points.”
He added, “That technique doesn’t create jobs. It might carry inflation down, sure—but it surely rewards imports. And that’s not the form of economic system we need to construct.”
On the difficulty of reserves, he supported the Financial institution of Ghana’s present restraint.
“I heard the First Deputy Governor say they’re not burning the reserves. I agree. Underneath the IMF-supported program, we had already gone past the ground. There’s room to intervene, however we shouldn’t waste it.”
As an alternative of aggressive market intervention, he referred to as for a long-term reserves build-up.
“What we’d like is predictability. Let’s construct our reserves so we are able to say, over the subsequent 10, 15, 20 years, the cedi can be steady. That helps everybody plan higher.”
He urged the central financial institution to obviously talk its stabilisation targets.
“The market is left guessing. That uncertainty causes disruption. What the market wants now’s stability, not drama.”
Prof Bokpin sees the present rally as policy-driven, however fragile.
“It’s not a blip. However it’s not sustainable both—not in its present kind. If we need to preserve the cedi robust, we should look past short-term fixes and take care of the supply-side constraints of this economic system.”
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DISCLAIMER: The Views, Feedback, Opinions, Contributions and Statements made by Readers and Contributors on this platform don’t essentially symbolize the views or coverage of Multimedia Group Restricted.
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