Economist Professor Godfred Bokpin says Ghana dangers undermining long-term macroeconomic stability by manipulating alternate charges to curb inflation as a substitute of increase overseas reserves.
In an interview on Newsfile, he argued that the Financial institution of Ghana’s present actions, whereas seemingly efficient within the brief time period, might come at a long-term price.
“This isn’t a blip,” he stated, referring to the latest appreciation of the cedi.
“There are causes for what is going on. It’s not purely unintended. From the 2025 price range, you can see that authorities’s intention was to stabilise the economic system.”
Prof Bokpin acknowledged the coordinated efforts between the Finance Ministry and the Financial institution of Ghana, commending each the Finance Minister and the Governor for working in sync.
“There’s coordination happening towards a standard objective,” he famous.
“From the fiscal aspect, there’s expenditure-based consolidation. Authorities is just not spending. And from the financial aspect, there’s tightening.”
Nonetheless, his foremost concern is how the central financial institution is utilizing beneficial FX inflows to drag down the alternate fee, probably to artificially suppress inflation, slightly than shoring up reserves.
“My suspicion is that the central financial institution is the best way to drive down inflation from the standpoint of alternate charges,” he stated.
“However that’s not sustainable. We needs to be constructing reserves. Not enjoying with charges.”
In response to Prof Bokpin, the macroeconomic situations might look secure on the floor—low authorities spending, subdued imports, improved FX flows—however that stability is fragile.
“As a result of we’re not spending, imports are low. Demand is subdued. That creates the house for the central financial institution to return into the market, even with comparatively small quantities, and trigger the cedi to strengthen,” he defined.
“However the motive seems to be to handle inflation artificially.”
Bokpin stated the transfer to strengthen the cedi primarily makes imports cheaper, which doesn’t assist job creation or native business.
“That technique doesn’t create jobs,” he stated flatly.
“From November 2023, inflation on domestically produced items is larger than imported inflation. That ought to fear us. You’re higher off importing and paying all of the port duties than producing domestically.”
He believes the authorities are relying an excessive amount of on the alternate fee to convey down inflation as a result of they can’t tackle inflation from the availability aspect.
“If the consideration is that we are able to’t repair supply-side constraints, and so we give attention to lowering demand, then I disagree with this method,” Prof Bokpin stated.
“We want supply-oriented insurance policies. What we’re doing now doesn’t coexist with provide reforms.”
For him, it’s a query of precedence and path.
“The market has adjusted largely to ¢15 to $1. For those who now drag it down additional, to what finish? What degree is the Financial institution of Ghana concentrating on? That hasn’t been communicated. And that uncertainty will be disruptive,” he warned.
In his view, a extra strategic method can be to grab this window of relative calm and accumulate reserves to underpin future stability.
“What the market wants is stability. Not spikes and crashes. Stability. We must always slightly construct our reserves,” he stated.
“That enables predictability. That enables planning. That enables the cedi to be secure over the subsequent 10, 15, 20 years.”
Prof Bokpin stated he agreed with the First Deputy Governor’s declare that the Financial institution is just not burning by way of reserves, however he warned of a slippery slope.
“Sure, we’re not under the ground set underneath the IMF programme. However we’ve breached that flooring earlier than—earlier than the elections. So there’s a danger.”
He cautioned in opposition to sacrificing long-term resilience for short-term optics.
“Anytime the cedi strengthens, the true situation is: can it’s sustained? If it could actually’t, then it creates volatility. And that’s not good for planning, not good for enterprise, not good for funding.”
As authorities spending stays low and FX flows are beneficial, he believes the prudent alternative is evident.
“That is the appropriate timing. Now we have the house. We needs to be constructing reserves. Not manipulating charges.”
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