Former Deputy Finance Minister, Dr. Stephen Amoah, has raised alarm over what he describes as “fundamental financial economic anomalies” in Ghana’s monetary and fiscal policies, urging immediate action to address their adverse effects on the economy.
Speaking in Parliament on Tuesday, February 11, 2025, Dr. Amoah stressed inconsistencies in the management of the policy rate, inflation, and government securities, warning that these issues are undermining economic stability and growth.
Dr. Amoah pointed to the disconnect between Ghana’s policy rate adjustments and their impact on inflation and economic growth. He noted that while the policy rate—the interest rate at which the Bank of Ghana lends to commercial banks—has been increased to curb inflation, the results have often been counterproductive.
“In inflationary-targeted monetary policy, the policy rate is increased to reduce inflation and stabilize the economy. However, the data shows the opposite trend in Ghana.”
“Between 2020 and 2023, policy rates rose from 14.75% to 29.50%, yet inflation surged from 9.94% to 40.28%. This anomaly must be addressed,” he stated
The Member of Parliament for Nhyiaeso explained that Ghana’s inflation is largely driven by cost-push factors, such as rising production costs, rather than demand-pull factors, where increased consumer spending drives prices up.
“When inflation is cost-push, increasing the policy rate only exacerbates the problem by raising the cost of borrowing for businesses, which rely heavily on debt financing,” he said.
Dr. Amoah also pointed to the impact of these policies on Ghana’s Gross Domestic Product (GDP) growth. He noted that GDP growth declined from 13.90% in 2011 to 3.4% in 2019, and further dropped from 5.10% in 2021 to 2.90% in 2023.
“These trends show that our current monetary policy framework is not yielding the desired results. It is eroding the purchasing power of Ghanaians, increasing the cost of doing business, and lowering living standards,” he said.
The MP also revisited concerns he raised during his maiden speech in the 8th Parliament regarding the pricing of treasury bills and risky assets. He argued that the current system deviates from global standards, making traditional investment models like the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theorem (APT) ineffective in Ghana.
“The pricing of government securities, which are supposed to be risk-free, is distorting the market. This introduces arbitrariness in capital asset pricing and undermines the fundamental principle of risk-return trade-offs in investment.”
“Some attribute this to the government’s high demand for funds, but whatever the cause, it is dysfunctional and harmful to our economy,” he explained.
Dr. Amoah proposed a comprehensive review of Ghana’s economic policies, including a shift from a purely free-market economy to a mixed-market system.
He suggested implementing price caps for monopolies, oligopolies, and cartels to protect consumers and promote fair competition.
He also called for the establishment of a joint committee comprising the Finance Committee, the Economy and Development Committee, and the Budget Committee to engage with the Bank of Ghana and the Ministry of Finance.
Dr. Amoah appealed to Parliament and relevant stakeholders to prioritize these issues and indicated these policy dysfunctions must be addressed to ensure sustainable economic growth, high employment, and a strong, stable currency.