Former Deputy Minister of Finance, George Kweku Ricketts-Hagan, is urging the Bank of Ghana to slow down on the interest rates policy hikes.
The Central Bank has been increasing interest rates as a measure to shore up the country’s dwindling dollars in an effort to stabilize the cedi’s value against the dollar.
However, Mr. Ricketts-Hagan is of the firm belief that the interest rates hikes are also significantly contributing to the high inflation rates in the country.
According to him, the measure being undertaken by the Central Bank will yield little to no results, hence his call for new measures to be considered.
“I want the Central Bank to cool down on these policy hikes. Within the last five months or so they have increased policy rates by about 750 basis points. That is not yielding any results and it will not,” he said on JoyNews’ PM Express.
His comment comes at a time when the cedi has been described as the worst performing currency worldwide after the Sri Lankan Rupee by Bloomberg in its latest financial report.
In less than 8 months, the Cedi has come under intense exchange rate pressure due to its continuous depreciation to some major international currencies such as the Dollar, Pound and Euro.
According to data put out by the Bank of Ghana, the Cedi began the year at $1.00 to GH¢6.02.
Just a month ago, one could exchange $1.00 for GH¢7.43, and in less than 20 days, traders needed an average of GH¢9.37 to buy $1.00.
This means the Cedi has lost more than GH¢3.30 of its value to the dollar in less than 8 months.
“That’s why I’m saying that if you don’t understand the architecture of the situation that we are facing at the moment, you’re going to continue doing things that are not going to yield any results. Look, you can give it ten months, one year, these policies by the Central Bank in the end is going to create more problems than it will solve until the managers of the economy on the fiscal side get up and act,” he said.
He stated that the main reason the country is in this financial quagmire is simply because those at the helm of government do not understand the economy they are supposedly managing.
This oblivion, he says, was exhibited in the Mid-Year Budget Review, when the government failed to propose effective measures to halt the free fall of the cedi and control inflation.
“There was nothing in the Mid-Year Review to suggest that they understand the problems that we’re facing and I’m not surprised that they’re not doing much but thinking that inflation issues are the job of the Central Bank.
“And the Central Bank by its orientation is also thinking same and doing things that are not going to yield any results. In the end, inflation will continue to be worse because where the inflation is coming from is not being tackled, and interest rate is going to make the economy in general worse than we are in now,” he said.