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Slash Policy Rate to 26.5%, Dr. Kwakye of IEA tells BoG

Ghana currently holds the highest real policy rate in Sub-Saharan Africa, as reported by the International Monetary Fund (IMF). Dr. Kwaye condemned this situation, labelling it as detrimental to the economy.

Dr. John Kwaye, the Head of Research at the Institute of Economic Affairs (IEA), has urged the Bank of Ghana (BoG) to slash its Monetary Policy Rate (MPR) by 250 basis points, lowering it from 29% to 26.5%. This call comes amidst growing concerns about Ghana’s high interest rate environment.

Dr. Kwaye, a former member of the Monetary Policy Committee (MPC) of the Bank of Ghana, voiced his stance via social media platform X, questioning the rationale behind maintaining the Policy Rate (PR) at 29%. His call echoes recent criticism from seasoned investment banker Togbe Afede XIV, who criticised the central bank for perpetuating a high-interest regime.


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Ghana currently holds the highest real policy rate in Sub-Saharan Africa, as reported by the International Monetary Fund (IMF). Dr. Kwaye condemned this situation, labelling it detrimental to the economy. He emphasised the need for a substantial reduction in the PR, especially considering the significant decline in inflation.

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“With inflation dropping sharply from 54% at end of 2022 to 25% at end April 2024, BoG must slash its PR drastically from its current level of 29%,” he said.

Highlighting key economic indicators such as the official cedi depreciation, inflation rate, and lending rates, Dr. Kwaye argued against the effectiveness of current monetary policies. He stressed that inflation in Ghana is primarily driven by supply-side factors rather than demand, suggesting that increasing the policy rate is not a viable solution.

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The upcoming MPC meeting, scheduled for May 22–24, 2024, faces pressure from Dr. Kwaye’s recommendations and similar sentiments expressed by Togbe Afede XIV. However, the recent uptick in transport fares, fuel prices, and cedi depreciation pose risks to inflation, potentially complicating any decision to reduce the policy rate.
While a reduction in the policy rate could lead to a decrease in lending rates, uncertainties surrounding inflation may limit the extent of any rate adjustment.

Nevertheless, the steady decline in the 91-day Treasury bill this year may influence lending rates positively if the MPC
opts for a rate cut.

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