This week, the Bank of Ghana\u2019s Monetary Policy Committee will meet for the first time this year, and their deliberations will culminate in a decision on where the central bank\u2019s benchmark Monetary Policy Rate will stand for the next two months.<\/p>\n
There have been tremendous improvements in various key macroeconomic performance indicators over the past year inflation has dropped to a long term low, taking interest rates down with it, the cedi has enjoyed historic appreciation against the United States dollar and has stabilized at a rate barely two-thirds of what it was as at late 2024, the merchandize trade surplus has reached a record high and so have gross international reserves.<\/p>\n
Consequently, the universal expectation is that yet another cut in the MPR will be announced this week, with the benchmark rate\u2019s current 18% – even though 1,000 basis points lower than the 28% it stood at during the first half of 2025 now more than three times the 5.4% headline consumer inflation rate recorded for December.<\/p>\n
But even as the private sector enthusiastically look towards yet another round of consequent interest rate cuts, the BoG Governor, Dr Johnson Asiama late last year correctly warned that monetary policy on its own cannot ensure the sustained stability of the country\u2019s economy.<\/p>\n
The initial hawkish monetary stance of the BoG, combined with government\u2019s fiscal restraint and consequent consolidation worked to bring inflation down sharply, before the central bank began its historically steep cut in its benchmark interest rate between late July and now. Instructively, government has still not opened the fiscal taps and the BoG has kept a tight lid on liquidity growth even as has pushed interest rates downwards.<\/p>\n
But while all this has reaped huge rewards with regards to macroeconomic stability, its sustainability will depend on collective efforts by government, the BoG, the private sector and the general populace, to both increase non-traditional exports and even more importantly, reduce import dependency.<\/p>\n
These efforts have to be directed towards a less external sector driven, more sustainable external macro-economic balance. To be sure, Ghana is now achieving a bigger merchandise trade surplus than at any other time over the medium to long term. But this is primarily the result of the unprecedented surge in the gold price on the international market which will not last much longer even though the rising import bill will, in the face of cheaper foreign exchange and cheaper credit with which to buy it.<\/p>\n
It is imperative therefore that Ghana both cuts its dependency on imports and diversifies its sources of forex, outside of simply borrowing it in inordinate quantities, which created the economic mess the country is only now rebounding from in the first place.<\/p>\n
Fiscal policy and the BoG\u2019s forex sales allocations need to deliberately support efforts in both of these regards. This means import substitution and non-traditional export promotion.<\/p>\n
To be sure, Ghana has aspired for both for a long time now. But non-traditional export promotion has taken precedence without due consideration for increased local value added and consequently, the import bill has continued to rise inordinately even as increased NTE revenues have been sticky.<\/p>\n
We therefore welcome the government\u2019s emphasis on import substitution as a policy priority, since it should be easier to reduce import consumption than to increase NTE sales.<\/p>\n
Without achieving both however, Ghana\u2019s impressive economic rebound will not be sustainable.<\/p>\n
<\/p>\n
<\/p>\n
<\/p>\n
<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
This week, the Bank of Ghana\u2019s Monetary Policy Committee will meet for the first time this year, and their deliberations will culminate in a decision on where the central bank\u2019s benchmark Monetary Policy Rate will stand for the next two months. There have been tremendous improvements in various key macroeconomic performance indicators over the past<\/p>\n","protected":false},"author":3,"featured_media":10746,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2618],"tags":[1401,2015,1679,1362,2213,2545],"class_list":{"0":"post-10744","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-editorial","8":"tag-bank-of-ghana-bog","9":"tag-dr-johnson-asiamah","10":"tag-fiscal-policy","11":"tag-inflation-drops","12":"tag-monetary-policy-committee-mpc","13":"tag-monetary-policy-rate-mpr"},"yoast_head":"\n