Kumasi: Professor Mohammed Hadrat Yusif, a Professor of Economics at the Kwame Nkrumah University of Science and Technology (KNUST), has advocated for stronger collaboration between the Bank of Ghana (BoG) and universities, as well as research institutions, to enhance the effectiveness of monetary policy in Ghana. He emphasized the necessity for a comprehensive and innovative research programme to address the BoG’s needs, such as understanding economic growth drivers, the transmission mechanism of monetary policy, and the effectiveness of monetary policy instruments.
According to Ghana News Agency, Prof Yusif made these recommendations during his professorial inaugural lecture at KNUST in Kumasi. He delivered a lecture on ‘Monetary Policy in Ghana: Revisiting the Tobin’s Model’, where he reviewed Ghana’s economic trajectory since independence, comparing it with countries like South Korea, Malaysia, and Mexico. He observed that, unlike these countries that achieved rapid and sustained growth, Ghana faces challenges with macroeconomic instability, high inflation, and unsustainable public debts.
Prof Yusif also recommended revisiting the existing Fiscal Responsibility Act, 2018 (Act 982), which mandates the government to maintain a fiscal balance with a deficit not exceeding 5 percent of the GDP. He suggested reviewing the Bank of Ghana Act, 2002 (Act 612, Section 30), which limits government borrowing to no more than 10 percent of the fiscal year’s total revenue. He argued that these legislative frameworks had failed to ensure fiscal discipline, and monetary policy must align with the country’s macroeconomic objectives.
Prof Yusif proposed adopting the Norway and Sweden model to embrace transparency and accountability in government financing and debt management. He stressed that fiscal policy is essential for effective monetary policy, advocating for responsible mining, enhanced cocoa production, public-private partnerships, and support for local businesses as goals for Ghana.
He also suggested that the BoG consider shifting from Inflation Targeting to Nominal GDP Targeting for monetary policy, which involves setting targets for the growth rate of nominal GDP. Prof Yusif concluded that pursuing financial discipline could increase real GDP growth and stabilize both the labor market and the financial system in Ghana.