Ghana’s Monetary Policy Committee has been lazy – Dr. Ato Forson
A senior member of parliament’s finance committee has criticized the country’s monetary policy committee following the World Bank’s comment that the Bank of Ghana has delayed raising the policy rate.
Speaking in an interview on Joy FMit is Featured Story On Wednesday, Dr Cassiel Ato Forson said the country’s monetary policy committee had been “lazy”.
According to him, the Monetary Policy Committee has also not been “proactive with the actions it needs to take” regarding the rescue from the economic crisis.
This is in line with World Bank concerns over the postponement of the Bank of Ghana (BoG) policy rate hike during the period of soaring global food prices and inflation.
“By contrast, in Ghana, the Central Bank delayed interest rate hikes until inflation fell from 13.9% in January 2022 to 19.4% in March, followed by a massive depreciation Then the monetary policy authority reacted aggressively with two consecutive rate hikes of 250 and 200 basis points in March  and maybe respectively,” the World Bank pointed out in its October 2022 Africa Pulse report.
“These sharp rate hikes proved insufficient to rein in rising prices, with inflation hitting a record high of 33.9% in August. ”, he added.
Dr Ato Forson agreed that the Monetary Policy Committee has been “very responsive”.
“Why would you have a meeting of the monetary policy committee, not raise the rate when everyone is pointing to a possibility of a rate hike when anyone, even other people who are not monetarists will tell you that it is necessary to raise the rate and deal with inflation as soon as possible.
“You decide not to hike, go home and sleep and when things get worse you call an emergency monetary policy committee to do what?” He asked.
In a related development, the World Bank has also classified Ghana as an over-indebted country, as it projects a national debt to gross domestic product (GDP) ratio of 104.6% by the end of 2022.
According to its October 2022 Africa Pulse report, debt is expected to increase significantly, from 76.6% a year earlier, amid a widening public deficit, massive weakening of the cedi and rising debt service costs.
It also projects a debt-to-GDP ratio of 99.7% and 101.8% of GDP in 2023 and 2024, respectively. The size of the Ghanaian economy is estimated at around $72 billion, while it is expected to spend around 70% of its revenue this year on servicing its debt.
The report comes at a time when the Bank and the International Monetary Fund (IMF) are conducting an analysis of the country’s debt sustainability.
Meanwhile, ratings agency Moody’s downgraded Ghana’s long-term issuer and senior unsecured debt ratings to CAA2 from CAA1 and placed the ratings under review for downgrade.
The downgrade to CAA2, he said, reflects the recent macroeconomic deterioration, further exacerbating the government’s liquidity and debt sustainability challenges and increasing the risk of default.