Emphasizing on the challenging situations bedevilling Ghana’s economy, Steve Hanke, an American economist, has called for a currency board to combat galloping inflation.

According to Steve Hanke, measuring inflation per his independent global tracker pegs Ghana’s inflation at 77%, 27 percentage points above the official rate of 50%. This calls for the need of a currency board (monetary authorities) to maintain the fixed exchange rate in relation to the foreign currencies, he said.

Touching on the prevailing challenges, Mr. Hankes pointed out that Ghana’s economy is heading towards failure by using the terminology ‘going down the tube’.

“Ghana came 8th in this week’s inflation table. I measured Ghana’s inflation at a stunning 77%/y. To rein in inflation, Ghana must install a currency board.
“It is not the first time I am calling for a currency board to be put in place to help salvage the economy.”
Steve Hanke

Hanke has also been very critical of government’s resort to the International Monetary Fund (IMF) amid an economic crunch that government has partly blamed on aftershocks of the COVID-19 pandemic and the Russia-Ukraine war.

Ghana had a torrid 2022 amid an economic crisis that forced government to seek an IMF facility at a time the cedi was rapidly depreciating, inflation was galloping and government was faced with multiple downgrades by rating agencies.

Government has promised to turn around the economic fortunes of the country after sealing a Staff-Level agreement with the IMF with the hope that funds from the US$3 billion facility will be released early this year.

Financial Sector To Remain Under Immense Pressure In 2023 Due To High Inflation

Ghana’s 8^th position per Steve Hanke’s independent inflation global tracker throws a big threat to the financial sector especially banks and broader securities.

Due to the economic uncertainty pegged with high inflation rates, the financial sector is set to come under scrutiny.

Currently, banks are rebalancing their portfolios and cutting back on new advances due to increasing inflationary pressure and a decline in Capital Adequacy Ratio amid concerns over Non-Performing Loans.

The Domestic Debt Exchange Program will also put additional pressure on this segment, since commercial and rural banks as well as institutional investors hold about 60 percent of the nation’s domestic debt.

Deposits, which remain a major component of banks’ funding mix, are anticipated to take a hit as customers hold onto cash due to increasing lack of confidence. However, the likelihood of a run-on banks remains very unlikely.

On the stock market front, where a loss of 12.38 percent was recorded in 2022 compared to more than 43 percent gain in 2021, limited activity is expected this fiscal year, while financial and technology stocks are anticipated to be bright spots.

Unlike technology stocks, however, financial stocks are expected to experience some level of pressure from uncertainty in the wider industry. The consensus among industry experts is that irrespective of the direct economic losses, the financial sector might experience in the medium term the loss of investor confidence, which will pose the biggest challenge this year and beyond.