An economist professor at the University of Ghana Business School, Professor Godfred Bokpin, has called on the Bank of Ghana to clearly communicate its exchange rate targets to avoid uncertainties that could negatively affect the market in the long run.
According to him, the strategies being used to manage the cedi must be transparent and properly communicated.
“I believe the central bank has a certain exchange rate level in mind that they want to achieve and stabilize at, but this hasn’t been communicated. It leaves the market guessing, and that causes uncertainty,” he was quoted as saying by myjoyonline.com.
Professor Bokpin added that the Central Bank’s current strategy, which targets inflation by manipulating the exchange rate, is unsustainable.
“Inflation is basically aggregate demand exceeding aggregate supply. If supply is constrained and you only focus on exchange rate-driven disinflation, it’s not sustainable. Whenever the cedi strengthens, the issue is always about sustainability. The ups and downs are not good for the market. They are not good for planning,” he said.
The economist also noted that short-term appreciation may harm the local economy in the long run.
Instead of focusing on short-term gains, he said, “We should rather build our reserves. That allows for predictability and stability, which would be more helpful.”
“What the market is looking for is stability, stability that allows businesses to plan, investors to make decisions, and producers to expand. What you need are supply-oriented policies. Supply-oriented policies will not coexist with what we are doing right now,” he intimated.
Professor Bokpin concluded with a warning, “If we continue this way, we’ll strengthen the cedi, make imports cheaper, and kill our local industry. We’ll lose jobs and undermine long-term economic resilience.”
SSD/MA
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