US-based Economist, Dr. Dennis Nsafoah wants the Bank of Ghana’s Inflation Targeting framework to be thoroughly reviewed after 20 years of moderate success.

According to him, the review is particularly important given the observations of the Vice President, Dr. Mahamudu Bawumia.

“In Ghana, there's no legal requirement to regularly review the Central Bank's mandate. Yet, after 20 years of IT with only moderate success, it's clear that a thorough review is needed. We urge the next government to take a close look at the Bank of Ghana's (BoG) mandate”, the University of Niagara Assistant Professor indicated.

In the Vice President’s book "Monetary Policy and Financial Sector Reform in Africa: Ghana's Experience," he discussed Ghana's shift from focusing on monetary aggregates to adopting an IT framework due to the former's frequent failure to meet its target.

According to the book, “the NPP government switched from the monetary targeting regime to inflation targeting regime because monetary targeting had not yielded the desired results judging from its frequent divergence of actual monetary growth from targeted monetary growth.”

But Dr. Nsafoah said despite BoG's proactive measures, from pioneering digital currency initiatives to contributing to debt sustainability, achieving its core mandate of price stability remains a challenge.

“This reality calls for a thorough review of BoG’s mandate”, he added.

Price stability crucial for macroeconomic stability

Dr. Nsafoah continued that price stability is essential for macroeconomic stability, and it is the bedrock for the Ghanaian economy.

Therefore, he stressed that keeping inflation low and stable is crucial for the long-term economic well-being of every Ghanaian.

He continued that price stability is the responsibility of the Bank of Ghana, adding “As stated under section 3 of the Bank of Ghana Act 2022 (Act 612), the primary objective of the Bank of Ghana is to maintain stability in the general level of prices”.

The Bank of Ghana officially adopted an IT framework in May 2002. The framework is designed to ensure price stability over the medium term.

At the institutional level, the government and the Central Bank jointly set the medium-term inflation target, and the Bank of Ghana is required to deploy its policy tools to attain the target.