More measures needed to sustain economy

The government and the Bank of Ghana have initiated moves to stem rising inflation and depreciation of the Cedi to address challenges facing the economy.

Sadly, the country in recent months have been witnessing rising inflation and depreciation, creating anxiety among the citizens and the business community.

For example, inflation which is the rate at which the prices of goods and services rise or fall, has currently crossed a single digit to 15.7 per cent and a dollar is exchanged for more than GHc7.

The rising inflation and the depreciation of the Cedi are not the doing of the government.

However, some economists who attribute the problem to rising food prices, upward adjustments in petroleum prices, the abrupt exit of some offshore investors from the country and repatriation of the profits by foreign companies, wish that the government would adopt policies to help reduce the prices.

Continuously, the rising inflation and depreciation of the Cedi have dominated headlines and become topics for discussions among the citizens and the business community.

Expectedly, the rising inflation and depreciation appear to be increasing the cost of living since the prices of goods and services are increasing day-by-day.

In the case of the government, it has, among other plans, announced its intentions to introduced $2 billion into the economy to save the Cedi from further decline,  while the Bank of Ghana (BoG) has increased the Monetary Policy Rate (MPR)  by 250 basis (2.5 percentage) points to 17 per cent from 14.5 per cent.

The MPR is the rate at which the BoG lends to commercial banks in the country and serves as the benchmark interest rate for onward lending to businesses.

In addition to increasing the MPR, the BoG has reversed or withdrawn three reliefs it introduced to cushion banks and the economy against the impact of the Coronavirus disease (COVID-19).

The Ghanaian Times wishes to commend the government and the BoG for the measures they have introduced to resuscitate the economy.

The introduction of $2 billion into the economy would help boost the confidence in the economy and for that matter the Cedi and address speculations of shortages of dollars in the market, fuelling the depreciation of the Cedi.

The measures of the BoG, particularly the increase in the MPR, is to make the cost of capital expensive and thus address the situation where too much money chases few goods, a situation which fuels inflation.

The increase in the MPR also makes financial investment in the country lucrative since one is likely to get more returns when he or she invests in treasury bills and other government financial instruments.

Apart from these, the increase in the MPR in turn will raise interest rates of the banks and thus discourage borrowing in order to check the situation where more money would be in the system to worsen the inflation situation.

This measure can also attract a lot of offshore investors to invest in the country to help the economy to attract a lot of dollars, which can address dollar liquidity challenges facing the country.

Besides, the withdrawal of the three coronavirus stimulus packages offered banks  will help mop up excess capital from the system, which drives inflation.

Since the measures introduced by the government and the BoG are short-to- medium-term actions to stem inflation and save the Cedi from further depreciation, the Ghanaian Times calls for long-term solutions to the challenges facing the economy.

Thus, among othersteps, the government should encourage local production to reduce imports into the country to help raise enough foreign exchange,

Also, ‘dollarisation’ of the economy can be reduced, if not stopped.