Accra, March 20, GNA – The Institute of Economics Affairs (IEA) is asking the Government to increase the Monetary Policy Rate (MPR) by 200 basis point to address the country’s inflationary challenges.
This is ahead of the Bank of Ghana’s (BoG) announcement of its Monetary Policy Committee meeting on Monday, March 21.
Currently, the MPR, the rate at which the Central Bank lends to commercial banks in the country is 14.5 per cent.
However, with the rising inflation, depreciation of the local currency (the Cedi), increases in fuel prices and power tariffs, the public policy think-tank said it was necessary for the rate to be increased to contain the economic pressures.
In its proposals, IEA asked the Central Bank to: “Increase the Policy Rate by 200 basis points from 14.5 per cent to 16.5 per cent to stem inflation.”
In addition to this, it suggested that the Bank increased the attractiveness of cedi-denominated assets to stem disinvestments from the money and capital markets and the negative effect on the cedi.
The Institute called for increase in the Primary Reserve Requirement [the minimum legal amount of reserves that a bank is required to hold against its deposits] from eight per cent to ten per cent to help curb liquidity creation by banks.
In the view of the policy think-tank the abolishment of the current import benchmark discount of 30 per cent for general goods and 10 per cent for vehicles would equally be helpful.
Aside these measures it proposed that Parliament passed the Tax Exemptions Bill to reduce the scope and scale of exemptions, enforce tax compliance by professionals, and introduce a temporary “windfall tax of 10 per cent on excess profits” of mining companies, oil companies, telcos and banks.
On the Electronic Transactions Levy (E-Levy), it proposed a splitting of the proposed rate of 1.75 per cent between telcos (1.0 per cent) and consumers (0.75 per cent).
Beyond these economic measures, the Institute urged the Government to reduce expenditure by restructuring Ministries from 30 to 20, and the number of Ministers from 86 to 56 (including 16 regional ministers), and
a slash of the pay of the Executive arm of government by 20 per cent, as well as the enforcement of the announced 20 per cent reduction of Ministries, Departments, and Agencies (MDAs) budgets.
a slash of the pay of the Executive arm of government by 20 per cent, as well as the enforcement of the announced 20 per cent reduction of Ministries, Departments, and Agencies (MDAs) budgets.
Introduce government-parent cost-sharing arrangement for the Free Senior High School (Free SHS) policy, and abolish the purchase of past examination questions for students.
A scrap of the Nation Builders Corps (NABCO) programme, freezing the allowances for nursing and teacher trainees, and impose a temporary freeze on recruitment into the public service.
These proposals, the Institute was of the view would help build policy credibility following a recent downgrade in Ghana’s credit ratings by Moody’s, and avoid going to the International Monetary Fund (IMF) for a bailout programme.
There have been many concerns about the current state of the Ghanaian economy, which had seen hikes in fuel prices, accompanied with increment in transport fares, depreciation of the Cedi, among others, which had exacerbated the economic hardship brought by the COVID-19 on many Ghanaians.
Meanwhile, the Government has consistently assured that it had put in place measures to contain the economic pressures, and even create more jobs for the youth with the introduction of the YouStart entrepreneurship programme.