As the local currency - Cedi - keeps depreciating against major trading currencies, especially the US Dollar and Pounds Sterling, the African Development Bank has advised the Bank of Ghana (BoG) to introduce an exchange rate policy to reduce the pressure on the Cedi.

It further said the Bank of Ghana must allow the Cedi to freely adjust based on changes in other macroeconomic fundamentals.

In a report titled ‘Driving Ghana’s Transformation: The reform of the global financial architecture,’ the African Development Bank asked the central bank to maintain its monetary policy rate high enough to tame inflation.

AfDB called on government to remove barriers that prevent domestic supply from responding to rising prices.

It advised government to boost labour productivity through investments in infrastructure and human capital.

“It should also maintain its monetary policy rate high enough to bring inflation back to its target zone and anchor inflation expectations. The Government should remove factors preventing domestic supply from responding to rising prices and boost labor productivity through investments in infrastructure and human capital," part of the report read.

“Introduce an exchange rate policy to reduce pressure on the Cedi exchange rate. The Bank of Ghana should allow the Cedi to freely adjust as much as possible based on changes in other macroeconomic fundamentals, because attempting to resist movements based on fundamentals could undermine growth,” it added.

Meanwhile, the Bank of Ghana in May this year maintained its benchmark Monetary Policy Rate (MPR) at 29 percent.

This was to anchor inflation expectations and prevent the Cedi depreciation from becoming entrenched.

SA/NOQ