IMF Urges Ghana to Prioritize Amendments to Bolster Central Bank Independence
The International Monetary Fund (IMF) has stressed the urgency for Ghana’s Cabinet to prioritize the adoption of amendments to the Bank of Ghana Act, aimed at bolstering the Central Bank’s independence.
This directive comes in response to the Bank’s substantial exposure to government financing.
The IMF advocates a cautious approach to the recapitalization of the Bank of Ghana, ensuring alignment with the fiscal constraints of the Economic Credit Facility programme.
While the Bank’s commitment to a prudent monetary stance has been acknowledged, the Fund insists on more substantial progress in implementing its safeguards assessment recommendations.
The IMF has underscored the necessity of maintaining a tight monetary policy, supported by robust liquidity absorption operations, until inflation aligns with the target band.
In light of recent currency depreciation, the Bank of Ghana is urged to adopt a prudent approach to mitigate the high and volatile inflation and to re-anchor inflation expectations. Continuous advancement in the Fund’s safeguards recommendations remains critical.
Furthermore, the IMF has called on the Bank of Ghana to persist in rebuilding its international reserves and to expedite reforms in its foreign exchange intervention framework.
Despite the notable reserve accumulation in 2023, attributed partly to temporary factors, the Fund highlights the importance of limiting foreign interventions to strengthen external buffers.
The IMF recommends that the Bank of Ghana formalize its internal foreign exchange intervention policy, conduct all foreign exchange interventions through an open and price-based auction mechanism, and reform the cedi reference rate. These measures are expected to enhance exchange rate flexibility and deepen the market.
