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IEA calls for comprehensive approach beyond inflation targeting framework

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Dr John Kwakye, Research Director at the Institute of Economic Affairs (IEA)

Ghana records highest inflation in 18 years at 23.6% in April

Ghana misses inflation targets, says IEA

The inflation targeting framework was adopted in 2007

The Institute of Economic Affairs (IEA) said a more comprehensive approach was needed to stem the surge in inflation in the country.

In 2007, the central bank adopted the inflation targeting framework as well as a flexible exchange rate regime to ensure price stability over the medium term.

But the institute’s research director, Dr. John Kwakye, said the country needs to go beyond its current inflation targeting framework as the existing structure is not helping Ghana achieve its goals. of inflation.

In a statement published and seen by GhanaWeb, the IEA boss argued for an inflation targeting framework well suited to the Ghanaian context.

“The Bank of Ghana’s BWI partners and the markets expect the Bank to adhere to the rules of the framework. According to the framework, public relations adjustments affect inflation by increasing the cost of credit and thereby reducing aggregate demand in the economy,” the statement read in part.

“We know, however, that in the Ghanaian context, the transmission of PR is constrained by an underdeveloped and less responsive financial sector. But even more important is the fact that Ghana has a long history of inflation with strong supply or cost undercurrents, in particular, food, fuel and the exchange rate. explained Dr. Kwakye.

He continued, “As a primarily demand management tool, the IT framework is less suited to Ghana’s type of inflation. It is more suitable for mature economies where inflation tends to be more demand driven.

He further called on the Bank of Ghana to engage with government and other relevant agencies to directly target key sources of inflationary pressures in particular; fuel, food, transportation and exchange rate to determine trends and drivers.

Here is the full statement below

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