Adnan Adams Mohammed
Chief Economist at World Bank has touted the Bank of Ghana’s monetary policy implementation in controlling inflation.
Contained in the World Bank’s latest Country Policy and Institutional Assessment (CPIA) report, titled “CPIA Africa 2024: Structural Reforms for a Vibrant Private Sector”, the report underscored the significant achievements of the Bank of Ghana in maintaining monetary stability and enhancing economic credibility.
The report, which focused on reforms across policy areas in Sub- Saharan Africa, noted that “Ghana’s authorities committed to policy reforms to strengthen the central bank’s independence”.
“This contributed to pursuing tight monetary policy, raising reserve ratios, and implementing a fiscal reform program that helped to reduce year- on-year inflation from 54 percent in December 2022 to 23 percent in December 2023”, the report launched in Accra, Ghana, last week posited.
Andrew Dabalen, World Bank Chief Economist for Africa, noted at report launch that, “The CPIA review offers a chance to identify areas of relative weakness and engage in a dialogue around policy reforms that can produce better development outcomes.”
Overall, the report highlights key trends and best practices to guide policymakers and international investors on the policy developments in the region, following the World Bank’s annual CPIA of countries eligible for International Development Association (IDA) assistance.
The observation made in the report reflects the long-held view of analysts and economists that the central bank’s monetary policy tightening stance has largely contributed to more than 30 percentage points drop in inflation from December 2022 to date.
To buttress the World Bank’s findings as contained in the report, the Governor of the Bank of Ghana, Dr. Ernest Addison, speaking at the Ministry of Finance-organised SME Growth and Opportunity Summit held in Accra, last week,
noted that “the Bank of Ghana has stepped up efforts to bring inflation under control, eliminate monetary financing of budget, and rebuild foreign currency buffers”.
“Just last week, the country successfully went through completion of the Second Review of the IMF programme by the IMF Board.
The Board reaffirmed the generally strong program performance and clear signs of emerging economic stabilisation.
However, noting substantial downside external and domestic risks, they underscored the importance of steadfast reform implementation to entrench macroeconomic stability and debt sustainability while fostering sustained growth and poverty reduction. Sustaining macroeconomic stability requires the Bank of Ghana to continue to ensure that the BOG keeps an eye on inflation”, the Governor noted.
Also, the CPIA report indicated the Central Bank’s independent stance has been instrumental in transitioning from managing global economic shocks to establishing stronger financial policies and transparency. “The region’s strong performance across multiple measures of Central Bank independence is a testament to the Bank of Ghana’s effective strategies,” the report noted.
“Under the stewardship of the Bank of Ghana, Ghana has witnessed a significant reduction in inflation. The central bank’s commitment to a tight monetary policy, including raising reserve ratios and halting monetary financing of the deficit, has been pivotal. These measures have resulted in a remarkable decrease in year-over-year inflation, from 54% in December 2022 to 23% in December 2023. “Ghana’s reforms around central bank independence played a crucial role in this achievement,” the report emphasised.
The CPIA report also highlighted that the region’s average score for monetary and exchange rate policy improved to 3.4 in 2023, with Ghana being one of the notable countries showing significant progress.
In addition to monetary policy, the Bank of Ghana has been a driving force in enhancing fiscal transparency and responsibility.
It noted that the government’s commitment to reinstating its fiscal rule in the medium term and strengthening the independence of its Fiscal Council reflects the collaborative efforts to bolster economic stability. These initiatives aim to enhance the credibility of the council’s macro-fiscal assumptions and ensure compliance with the fiscal rule.
The CPIA, an annual diagnostic tool for countries eligible for financing from the International Development Association (IDA), highlights areas of policy reform and economic progress.
