The newly appointed governor of the Central Bank of Ghana, Dr Abdul-Nashiru Issahaku, would have to be firm and stand his grounds to check government spending if he is to make any meaningful impact on the economy.
Mr Kenneth Thompson, Chief Executive Officer, Dalex Finance and Leasing Company Limited, says Dr Nashiru would make a mark during his tenure as governor if he is able to take the tough decision of pulling the brakes on government spending, especially during the election year.
“The biggest weapon the governor has is his ability to stop government from spending money it doesn’t have”, he said.
According to him, the new governor must start by rebuilding confident in the central bank, “then people would know there is somebody who can pull the brakes on government spending pattern”.
Additionally, the governor must take cognisance of the fact that the economy has collapsed, and in turn take some tough decisions to build confidence in the economy so people can start to re-invest in the economy.
“Because the economy is not going to be revived by the government, it is going to be revived by people investing in it, and investment is influenced by confidence”.
Many have expressed reservation about government’s ability to implement a prudent fiscal policy in an electioneering year, but Mr Thompson says the governor can pull the brakes on government spending by beginning to take measures such as “bouncing government cheques”.
According to him, overconcentration on interest rate changes would have very little influence on the current economic situation as the government still remains the biggest player in the economy and, therefore, does not react to these changes.
“So if you drop interest rates now, there wouldn’t be any response because there is no liquidity anyway”, he argued.
He added that limiting government’s ability to overspend would be the governor’s only weapon to force the government to make corrections that would then influence the wider economy.
“He must help the government save itself from itself”, he emphasised.
The central bank has come under varied criticisms over its handling of monetary policies, particularly the rising rate of inflation and the continuous depreciation of the cedi against the major trading currencies, especially the US dollar.
The cedi depreciated by over 18 per cent in 2015 while inflation stood at 17.7 per cent within the same period.
As part of measures to shore up the value of the falling cedi, the central bank injected $20 million into critical areas of the economy, including other regulations, which were heavily criticised.
A former Deputy Governor of the Bank of Ghana, Emmanuel Asiedu-Mante has also called on the new governor of the central bank to focus on fixing the country’s macroeconomic challenges.
According to Mr Asiedu-Mante, a turnaround of the economy can be achieved.
Speaking to Citi Business News, Mr Asiedu-Mante said he is confident of Dr Abdul Nashiru Issahaku’s ability.
“We all know the challenges confronting the economy: high interest rate, high inflation, until recently unstable exchange rate. These are pressing issues that we need to address and I expect anybody who comes into that seat to deal with”, he said.
“Fortunately, he has been a deputy governor and so he is aware of these problems, and I expect him to address them because that is what the Bank of Ghana is tasked to do anyway to maintain the value of the currency”, he added.
Mr Asiedu-Mante was of the view that anybody who becomes governor of the central bank has the daunting task to deal with these problems, which affect the macroeconomic stability of the country, first before he thinks of anything else.
“The macro indices need to be stable so that the economy can function properly, and any governor worth his salt will solve these problems as soon as possible, that is unstable currency, high interest rate, which affects business”, he said.
A currency analyst, Samuel Ampah has disclosed to Citi Business News he expects the new central bank governor to implement policies to stabilise the local currency.
The cedi, which depreciated by 14 per cent in the first quarter of 2014, only depreciated by a percentage point for the same period this year.
Speaking to Citi Business News, Samuel Ampah urged Dr Issahaku to consider continuing the central bank’s current policy of an increased supply of foreign currency to meet demand, as well as the repatriation of export revenue to Ghana.
“What the central bank is doing at the moment, that is stabilising the currency in terms of ensuring that the inflows are coming in, has to do with demand and supply, so therefore if the inflows are there it could meet any demands that come into the market.”
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