IMF Resident Representative to Ghana, Dr Adrian Alter, gave the caution after lauding the BoG’s efforts to tame inflation.
“The BoG has kept its monetary policy consistently tight and basically managed to reduce the inflationary pressures through these prudent policies,” Dr. Alter remarked.
“So the fact that the BoG decided to cut rates from a very high level. 28 percent, I think, in March to the current level of 21.5, what you need to take into account is also real interest rates,” he added.
He explained that real interest rates remain above historical averages and should be managed carefully to preserve stability.
“What the IMF team advised the BoG is to keep a prudent monetary policy in order for inflation expectations to re-anchor at single digits. You need to keep monetary policy tighter than usual to have these expectations re-anchor within the monetary policy band,” he told Channel One TV.
Recently, the Governor of the Bank of Ghana (BoG), Dr Johnson Asiama, said that the central bank continues to hold tight to its monetary policy stance despite the easing of measures to tame inflation.
Explaining what accounted for the drop in inflation since the new administration took over, Dr Asiama gave the credit to the tight monetary stance of the BoG.
“When we came in, we saw that we had to do a number of things; even the entire monetary policy framework needed to be upgraded, and we needed to strengthen the credibility of the central bank. There was a lot of liquidity that had built up, so we needed to do lots of sterilisation.
“We also needed the complementary efforts from the fiscal authorities, and so we had to engage the fiscal authorities at the same time. You also needed to look at food prices, so it was a complementary effort across all fronts that has helped to deliver the disinflation we are looking at.
“But we give a lot of credit to the tight monetary policy stance we had currently preserved, even though we are easing, we are still holding that anchor very strong, strong liquidity management, strong sterilisation. For that, we will not compromise even as we ease downward,” he said in an exclusive interview on the sidelines of the International Monetary Fund (IMF)/World Bank spring meetings in Washington.
Dr Johnson Asiama further stated that the Mahama administration has so far done a good job in restoring the economy, hence Ghana can exit the IMF programme next year.
He made the point that Ghana is currently ahead of most of the targets and benchmarks under the IMF programme.
“We are running ahead of programme target for the year on almost everything: inflation, reserves, build up economic growth, we are running ahead, and we are happy that we will be able to exit the programme next year, and so far so good, the first 8 months have been revealing, we think we have done a good job. We are getting all the upgrades from our rating agencies, which shows clearly that we are on the right path,” he said.
