Bank of Ghana warns against lifting policy support too soon

The first deputy governor of the Bank of Ghana (BoG) says the various policies implemented had helped to moderate the impact of the pandemic on the economy and contributed significantly to a faster pace of economic recovery

The Bank of Ghana (BoG) has warned policy makers against the early withdrawal of support measures instituted to address the effects of the COVID-19 pandemic, saying it could harm the economic recovery process.

Dr Maxwell Opoku-Afari, the first deputy Governor of Bank of Ghana (BoG), said the timing of withdrawing policy support would need to be carefully done not to jeopardise the recovery process.

“A careful balancing act between unwinding the policy support would be needed by policy makers to ensure that stability in a post-pandemic environment is guaranteed,” Dr Opoku-Afari said.

He was speaking at the opening of a two-day workshop on financial literacy for Journalists for Business Advocacy (JBA) at Prampram in the Greater Accra Region on the theme: “Understanding Monetary Policy in a Post Pandemic Era.”

He said the BoG would continue to monitor development and take the appropriate decisions.

At the height of the COVID-19 pandemic, the government introduced some key innovative policy measures to help contain the negative impact of the pandemic on the citizenry and the economy.

Dr Opoku-Afari said Ghana’s response to the COVID-19 pandemic has been decisive and broad-based, with both the fiscal and monetary authorities implementing complementary measures to tackle the effects of the pandemic.

The government, in particular, adopted a “whatever it takes” stance to minimize the impact of the pandemic, culminating in some GHC21 billion COVID-19-related expenditure in 2020.

To complement the fiscal policy actions, the Bank of Ghana (BoG) deployed various tools, namely: the interest rate tool, macroprudential policies, market liquidity support, and triggered its emergency financing clause to purchase a government COVID-19 Bond.

Dr Opoku-Afari said the mix of policies implemented had helped to moderate the impact of the pandemic on the economy and contributed significantly to a faster pace of economic recovery than anticipated.

“Ghana managed to record a measured positive growth in 2020 unlike many others that slipped into negative growth rates.

“Amidst the pandemic and surge in inflation, the central bank has successfully steered inflation back into the target band, a process that was significantly helped by the extraordinary stability in the foreign exchange market in an election year while foreign exchange reserves level is at a record high,” he said.

He said the economy was entering a new phase of macroeconomic developments with low inflation and well-anchored expectations and pledged the BoG would pursue prudent policies to safeguard the primary objective of price stability.

On the current inflation targeting regime, Dr Opoku-Afari said transparency was crucial in fostering the credibility of the central bank’s policies and called on financial journalists to play a key role in disseminating the Bank’s policies to support the recovery process.

“The central bank will continue to implement policies consistent with its inflation targeting framework to entrench the current low inflation environment,” he added.

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