It smacks of ignorance to blame BoG for not stabilizing exchange rate – Kwakye

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Stabilizing the exchange rate in Ghana is all about export and how much is being derived from it, Director of Research at the Institute of Economic Affairs (IEA) , Dr John Kwakye has said.

In his view, it is not the function of the Bank of Ghana (BoG) to control exchange rate because the central bank does not determine exports.

Dr Kwakye indicated that persons who blame the BoG for not stabilizing the rate may be speaking out of ignorance.

Currently, the dollar is trading at 8 Cedis.

Speaking at the 3businesscolloquium organized by Media General in Accra on Wednesday July 6, Dr Kwakye said “The exchange rate is not about monetary policy alone. When people blame Bank of Ghana for not stabilizing the exchange rate, I see that they don’t understand.

“Bank of Ghana alone cannot stabilize the exchange rate, it is about how much export we are producing as a country , how much ae we earning from exports, that one bank of Ghana doesn’t determine it. Of course they can help, they have to work with government to put in polices to do do that. Bank of Ghana just manages the reserves that we all we receive.”

Regarding high inflation, Dr Kwakye further said that the rising rate cannot be tackled effectively with only demand management tool.

He stated that the supply side of the drivers of inflation – food, fuel and exchange rate, should also be targeted by the managers of the economy.

“Inflation is coming mostly from food, fuel and the exchange rate is also a factor, so they are mainly supply side of the factors. That type of inflation, you can’t fight it with a demand management tool effectively.

“So we have said that the central bank and government should to work together to address to target the very source of of the inflation. We are not saying do away with the inflation targeting framework,” he said.

He added “It should still be there but you should also look at the supply side, the cost side that are driving your inflation.”

“In fact, even in the US, UK, they are struggling to keep inflation and this is exactly because we are all facing a different type of inflation now all over the world. So we are saying that here, the central bank and government should work more closely together in fighting inflation.”

Inflation rate in May 2022 recorded 27.6% from the 23.6% recorded in April 2022, the Ghana Statistical Service (GS) announced.

The Government Statistician, Professor Kobina Annim, explained at a press conference in Accra on Wednesday June 8 that the rate of inflations for Transport (39.0%), Household Equipment and Maintenance (33.8%), Housing, Water, Gas and Electricity(32.3%) and Food and Non-Alcoholic Beverages (30.1.6%) were higher than the national average (27.6%).

Regarding food inflation five sub-classes record inflation rates higher than the overall food inflation (30.1%) in May.

The inflation for imported goods was 28.2%, which is higher than the 24.7% recorded for April 2022, while the inflation for locally produced items was 27.3%, up from the 23.0% recorded in April 2022.

By Laud Nartey||Ghana

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