By: Kekekli K. Blamey
The International Monetary Fund (IMF) wants the adoption by the Cabinet of the amendments to the Bank of Ghana Act to remain a priority to strengthen the Central Bank’s independence.
This follows the high exposure of the Central Bank to the Government of Ghana’s financing.
According to the Fund, the recapitalization of the Bank of Ghana should follow a cautious approach that considers fiscal space available under the Economic Credit Facility program.
It however stated that the Bank of Ghana’s commitment to maintain a prudent monetary stance is welcome, but more progress is needed to address the Fund’s safeguards assessment recommendations.
“A tight policy stance—supported by robust liquidity absorption operations—is warranted until inflation approaches the target band. Against the backdrop of the recent currency depreciation, the BoG should remain prudent to ensure a reduction in the still high and volatile inflation and re-anchoring of inflation expectations. Continued progress in advancing Fund’s advice on safeguards is also warranted”.
It continued that the BoG should continue rebuilding international reserves and accelerate reforms to its foreign exchange intervention framework.
While commending the large outperformance of reserves accumulation in 2023, the IMF noted that it is partially the result of temporary factors and that, as we advance, limiting foreign interventions remains key to rebuilding external buffers.
It urged the BoG to adopt a formal internal foreign exchange intervention policy framework, implement all FX interventions through an open and price-based FX auction mechanism; and reform the cedi reference rate.
These measures, it believes, would better underpin exchange rate flexibility, and deepen the exchange rate market.
