A Senior Lecturer at the University of Ghana Business School (UGBS), Dr. Patrick Assuming has jumped to the defense of the Bank of Ghana (BoG) over comments that it was slow in dealing with inflation.
This comes after World Bank in its 2022 Africa’s Pulse Report, blamed the BoG for the current inflation rate largely because it delayed in implementing monetary policy hikes. The Bretton Woods institution said this has led to a projected debt-to-GDP ratio of more than 100 percent by end of the year.
In an interview on Joy FM’s Midday News on Friday, the Economist described such criticisms as ‘unfair’.
According to him, per figures available to him, he believes BoG acted quickly to raise the policy rate.
“If you look at the numbers, even though the inflation rate started rising from June 2021, it was still below the upper limit of the threshold, the medium-term target band is six to 10 percent so you notice that even though it was rising, it crossed the 10 percent only in September.
“Now that number would have been read in October and at the first sitting after the number crossed the 10 percent threshold, they raised the policy rate… … so I don’t think that the Bank of Ghana delayed at all,” he explained.
Also, the Bank of Ghana has refuted the World Bank’s assertion that it is responsible for the increasing rate of inflation in the country.
According to the Central Bank, it cannot be blamed for the rising inflation which has affected the cost of goods and services.
Announcing a monetary policy increment on Thursday, thus a 200 basis points increase to 24.5 percent, the Governor of the Bank of Ghana, Dr Ernest Addison, explained that the rising inflation rate is not a result of delay in tightening the monetary policy rate.
He said Ghana is amongst the first countries to tighten its monetary policy rate, therefore the assertion that it delayed in doing so, hence the rise in inflation, is not acceptable.
“They’re of the other view that the monetary policy tightening is the way to go. Except that we’re late by their assessment, which I also disagree with because we started this policy tightening as far back as November 2021. It wasn’t in January that we got locked out of the market”, he added.
Meanwhile, an Economist at the University of Ghana’s Institute for Statistical, Social and Economic Research (ISSER) Professor Charles Ackah disagrees with BoG’s increment.
Speaking on JoyNews’ PM Express on Thursday, he stated that the Bank of Ghana’s recent policy rate hike might be a measure in the wrong direction.
According to him, while increasing policy rates across the globe have been used during inflation caused by demand and supply disparities, Ghana’s inflation is rather structural and does not necessarily need a continuous increment of the policy rate.
He noted that even though the policy rate hike will reduce month-on-month inflation for the short term, in the medium to long term, the country may experience a shrinking economy and increased unemployment rates.
For this reason, he called on the Central Bank to reduce the policy rate instead in order to drive economic growth and employment. He further urged government to “come out with fiscal stimulus to help people to increase their purchasing power to survive.”