Policy rate hike came at a wrong time; government must be financially disciplined - IPPA

The Institute of Public Policy and Accountability (IPPA) believes the Bank of Ghana acted too quickly. It raised its policy rate by 100 basis points to 28%.

The IPPA noted that inflation is high, above 20%. However, it has declined for two consecutive months. The Monetary Policy Committee could have waited before raising the policy rate.

The IPPA stated that the timing of this increase is wrong. While inflation remains above 20%, it has shown slight declines. The Committee should have monitored the situation longer before making changes.

An increase in the policy rate discourages businesses and consumers. They are already struggling with high operational and living costs. The IPPA urged the Bank of Ghana to reconsider its inflation targeting framework.

They believe relying solely on this policy is insufficient. Current inflation drivers are supply-side issues, not demand-side ones.

There was a split decision among the five-member Monetary Policy Committee (MPC). Three members supported an increase, while two disagreed.

The IPPA expressed concern about high borrowing costs for businesses. They also questioned the government's borrowing habits and fiscal management.

They urged the Bank of Ghana not to lend to the government without scrutiny. A disciplined government is crucial for strong macroeconomic fundamentals.

Lower interest rates, lower inflation, reduced borrowing, and stable exchange rates are essential for growth. Inconsistent fiscal policies have hindered progress over the years.

The IPPA encouraged the Bank of Ghana to criticize poor government management when necessary. It should resist pressure to lend or print money for government needs.

Additionally, they called on the government to avoid excessive borrowing and spending beyond its means. Borrowed funds should be invested in productive sectors of the economy.