The Member of Parliament for Nhyiaeso, Hon. Dr. Stephen Amoah, has sounded the alarm on what he describes as “fundamental financial economic anomalies” in Ghana’s fiscal and monetary policies.
He called for immediate reforms to address the growing concerns over inflation, policy rate misalignment, and government securities pricing.
Inflation and interest rates
Addressing journalists in Parliament on Tuesday, February 11, 29, 2025, the former Deputy Finance Minister questioned the effectiveness of Ghana’s monetary policy, emphasizing a disconnect between policy rate hikes and inflation control.
“In theory, raising the policy rate should help curb inflation, but in our case, it has not worked. Between 2020 and 2023, policy rates surged from 14.75% to 29.50%, yet inflation skyrocketed from 9.94% to 40.28%. This is an anomaly that requires urgent attention,” he stated.
He argued that inflation in Ghana is primarily cost-push, driven by rising production and importation costs, rather than demand-pull factors.
“If inflation stems from high production costs, increasing interest rates only worsen the financial situation by making borrowing more expensive for businesses,” he explained.
Dr. Amoah also raised concerns about Ghana’s slowing economic growth. He pointed to a sharp drop in GDP growth from 13.90% in 2011 to 3.4% in 2019, with a further decline from 5.10% in 2021 to 2.90% in 2023.
He said, “These numbers tell a painful story. Our economic policies are failing to create jobs, sustain businesses, or protect the purchasing power of citizens. If we continue on this trajectory, the hardship will only deepen.”
The MP also criticized the pricing of government securities, arguing that the high yields on treasury bills have distorted Ghana’s financial markets.
“Treasury bills are supposed to be risk-free, yet their pricing is introducing serious inconsistencies in our capital markets. This makes global investment models like the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT) ineffective in Ghana,” he said.
He warned that the current system discourages private sector investment and leads to an over-reliance on government borrowing.
The mispricing of risk in our economy, he said, is dangerous stating, “If we don’t fix it, we will continue to struggle with high interest rates and poor investment confidence,” he cautioned.
Reforms
The former Deputy Finance Minister called for a shift from a pure free-market system to a mixed-market economy where strategic government interventions would regulate monopolies and protect consumers.
“In an economy like ours, where a few businesses dominate entire industries, allowing unchecked profiteering hurts the average Ghanaian. We need price caps and regulations to level the playing field,” he said.
Immediate action
He proposed the formation of a joint parliamentary committee, bringing together the Finance Committee, Economy and Development Committee, and Budget Committee to work closely with the Bank of Ghana and the Ministry of Finance.
“Our monetary policies must be guided by practical solutions, not outdated models that don’t reflect our economic realities,” he stressed.
Dr. Amoah also appealed to policymakers and stakeholders, urging them to act before the situation worsens stating, “We cannot keep doing the same things and expect different results. If we truly want economic independence, we must address these fundamental flaws now.”
By Osumanu Al-Hassan/thenewsbulletin24.com