Professor John Gatsi, the Dean of the University of Cape Coast (UCC) Business School, has challenged the notion that Ghana’s current exchange rate stability of GHC12 to the dollar is a clear indicator of economic rebound. Despite President Nana Addo Dankwa Akufo-Addo’s assertion in his Christmas message that the nation’s economy is bouncing back, Professor Gatsi urged a more nuanced examination of economic indicators.
The cedi is presently exchanging at GHC12.00 to $1.00, a rate that has stabilized but, according to Professor Gatsi, does not necessarily signal robust economic growth. He expressed skepticism about the use of the exchange rate as a sole metric for economic recovery.
“You do not just say that because the exchange rate has stabilized at the highest level from about GHC6.00 last year to about GHC12.00, so, if it’s stable around GHC12, you don’t use that to tell Ghanaians that things are better for them and things would be better in 2026.”
Professor John Gatsi
President Akufo-Addo, in his Christmas address, painted an optimistic picture of Ghana’s economic trajectory, citing a relatively stable exchange rate and a drop in inflation as indicators of recovery. He mentioned, “Inflation is being reigned in, we are experiencing a relatively stable exchange rate, and growth in our economy is rebounding.”
However, Professor Gatsi raises crucial pointed challenging this narrative. He points to other economic indicators, such as inflation and policy rates, which he argues do not align with the notion of a rebounding economy. He asserted that a reduction in inflation alone does not signify a resolution to the country’s economic challenges when faced with issues like hardship, unemployment, and poverty.
“When we say an economy has been messed up, and to correct that economy, it doesn’t take inflation reducing from 54% to 26% to indicate that things are better. When the policy rate has increased from 14% to 30%. You don’t just look at headline inflation falling to 26% to think that you have solved the problem of the country when hardship, unemployment, and poverty have doubled.”
Professor John Gatsi
The Professor of Finance and Economics argues that a more comprehensive approach is needed to assess the true state of the economy. He emphasizes the significance of considering multiple indices, including policy rates and a stronger exchange rate, to provide a holistic view of economic health.
While acknowledging the need for leaders to provide assurances, especially during festive seasons, Professor Gatsi contends that the President’s message may be more about offering comfort than reflecting the economic reality. “He is giving a Christmas message, so he is only talking to just assure people. So what he is saying is not the reality,” Prof Gatsi stressed.
Professor Gatsi’s perspective adds depth to the discussion, encouraging a closer examination of various economic factors to gauge the true trajectory of Ghana’s economic rebound. The discourse continues, highlighting the complexities of interpreting economic data and the importance of a multifaceted approach to understanding a nation’s financial health.
Understanding Policy Rates: Navigating the Economic Landscape
Policy rates play a pivotal role in shaping a nation’s economic landscape. Also known as the central bank’s benchmark interest rate, it serves as a tool for monetary policy. Typically set by the central bank, policy rates influence borrowing costs, inflation, and overall economic activity.
When a central bank adjusts policy rates, it aims to achieve specific economic objectives. A reduction in policy rates encourages borrowing and spending, stimulating economic growth. Conversely, raising rates can cool inflationary pressures and prevent an overheated economy.
Investors, businesses, and financial institutions closely monitor policy rate decisions as they impact interest rates across the economy. A lower policy rate can make loans more affordable, fostering investment and consumption. However, it also poses the risk of higher inflation.
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