An economist has advised Ghana’s government to renegotiate the agreements with the International Monetary Fund (IMF) so that the Bank of Ghana can inject some dollars to help deal with the cedi’s depreciation.
Mr. Enoch Okonah said it is important for the central bank to pump in some dollars into the forex market to stabilise the local currency against the US dollar.
Until Ghana secured the bailout from the IMF, the BoG quarterly pumped in some dollars in the forex market to cushion the local cedi.
This initiative was launched by the bank a few years ago and aimed at tackling the occurrence of speculation, which is a major cause of currency depreciation.
In the first quarter of 2022, the central bank pumped US$450 million into the forex market in a bid to stabilise the local currency against the US dollar.
This was announced in a release by the bank on January 4, 2022, in the auction target calendar.
The BoG took the decision after the local currency recorded a 4 percent depreciation against the US dollar at the end of 2021.
Since the country received a bailout, the BoG has not taken this action.
Reacting to this, the economist said it would be prudent if the government went back to the IMF and renegotiated its conditions to allow the central bank to pump in some more dollars to help the cedi appreciate against the dollar.
Countries that borrow from the IMF are expected to select, design, and implement policies to make their economic programmes successful.
The programme is described in a letter of intent, which typically includes a memorandum of economic and financial policies for a more detailed description of the policies. The programme’s objectives and policies depend on a country’s circumstances.
The key objective is to help restore or maintain balance of payments viability and macroeconomic stability while setting the stage for sustained, high-quality growth.
The conditions are related to macroeconomic variables under the control of country authorities.
The variables include monetary and credit aggregates, international reserves, fiscal balances, and external borrowing, which requires a ceiling on new public guarantees, a ceiling on external debt, a ceiling on public sector external arrears, a ceiling on the general government wage bill, a ceiling on domestic arrears, and a ceiling on government borrowing from the central bank.
Mr. Okonah believes that although these are measures aimed at ensuring stability, the current depreciation of the Ghanaian cedi is affecting us and increasing our inflation rates, causing the prices of commodities, especially food, to hike.
To help address the challenge in the immediate term, he has advised the government “to immediately reach an agreement with the IMF; the IMF says the BoG cannot pump in dollars into the forex market. When that happens, it will create further problems. Therefore, we should reach an agreement with the IMF so they will review that stringent policy stance or condition.”
By: Rainbowradioonline.com/Ghana
