The failure of the Bank of Ghana (BoG) to announce the target cedi-dollar rate it wants the exchange rate to settle could potentially ruin the gains made so far, this is the observation of an economist at the University of Ghana Business School, Prof. Godfred Alufar Bokpin
Prof. Bokpin says the silence of the BoG’s intended target for the cedi’s exchange rate could signal a lack of transparency and could cause significant market disruptions and economic uncertainty.
In his recent analysis of the central bank’s current strategy to drive down inflation by appreciating the local currency, Prof. Bokpin noted that while the BoG may have a specific exchange rate level in mind, it has failed to communicate that clearly to the market.
“I believe that the central bank has at the back of their mind a certain exchange rate level that they want to hit and stabilise at that point. That hasn’t been communicated to the market,” he remarked.
Prof. Bokpin explains that while exchange rate intervention may help ease inflation in the short term, the absence of clear communication on where the BoG wants the rate to settle fuels uncertainty among market participants.
This, he believes, undermines confidence in policy direction and creates an unstable trading environment.
He said, “It leaves the market guessing, and that itself can cause uncertainty. Disruption in itself is not that good at this level. What the market is looking for is stability.”
He warned that this guessing game around the cedi’s trajectory could distort investment decisions and create unintended volatility in the trade and commerce sector, particularly in an economy already battling inflationary pressures and external vulnerabilities.
Prof. Bokpin emphasized the need for the Bank of Ghana to be more transparent about its exchange rate strategy and anchor expectations through credible and consistent signals. This, he argues, will not only improve policy effectiveness but also promote market stability.
To him, if the central bank’s goal is to achieve a stable cedi, then it must provide the necessary guidance and communication to allow businesses, investors, and the wider economy to plan accordingly.
He concluded that effective monetary policy is not only about actions but also about managing perceptions, making communication a central pillar in maintaining market confidence.
