The Bank of Ghana (BoG) has allayed fears that the economic recovery witnessed over the period will start falling after the country exits the programme with the International Monetary Fund (IMF).
The current IMF ECF programme will end sometime in the second quarter of this year.
There are concerns that beyond the programme completion, Ghana may be tempted to go down the path of fiscal slippages and bring the economy to the brink of malaise.
Ghana’s economic history is replete with economic lapses following a period of stabilisation after a Fund programme.
Asked whether in the opinion of the BoG, the government can stay the course of fiscal rectitude, monetary measuredness and overall economic prudence or whether Ghana will need a post-programme arrangement, such as the Policy Coordination Instrument (PCI) or Policy Support Instrument (PSI) of the IMF, the BoG said in the Frequently Asked Questions that they are fully aware that Ghana’s economic history has occasionally been characterized by policy slippages following the completion of stabilisation programmes.
For this reason, it said, both the Bank of Ghana and the Government remain strongly committed to maintaining prudent monetary policy, fiscal discipline, and sound macroeconomic management beyond the life of the programme.
“Our objective is to ensure that macroeconomic stability becomes embedded in our domestic policy framework, supported by the fiscal responsibility provisions, the operational independence of the Bank, and continued policy coordination between fiscal and monetary authorities,” the BoG said.
Asked what alternative policy measures the BoG has in place to sustain economic stability and safeguard the country’s external and fiscal position, the BoG said, “At the BoG, our policy framework is specifically designed to build resilience to external shocks, including fluctuations in global commodity prices. In that regard, we continue to focus on maintaining price stability through prudent monetary policy, strengthening the foreign exchange market framework, and rebuilding of external buffers through the accumulation of reserves to mitigate the effects of external shocks similar to those that may arise from commodity price fluctuations.
“It is also important to note that the Government’s ongoing fiscal consolidation efforts and reforms aimed at enhancing domestic revenue mobilisation, strengthening public financial management, and supporting export diversification will help broaden the economy’s sources of foreign exchange earnings, which would reduce vulnerability to commodity price cycles.
“The Domestic Gold Purchase Programme is intended to build reserves from a domestic asset, rather than rely on gold price movements. Recognising that large gold holdings expose reserves to price volatility, the Bank mitigates this risk through active reserve management, including portfolio rebalancing, selective divestment of bullion and the use of hedging strategies when needed, to protect the external position and maintain long-term financial stability.”
