In a bold call for reform, Professor Mohammed Hadrat Yusif, a seasoned economist at the Kwame Nkrumah University of Science and Technology (KNUST), is urging the Bank of Ghana (BoG) to revamp its approach to monetary policy by building stronger ties with academic and research institutions.
Speaking at his professorial inaugural lecture in Kumasi, Prof. Yusif called for a shift from conventional inflation targeting to Nominal GDP Targeting, arguing that the current strategy has proven inadequate in stabilising Ghana’s economy. His lecture, titled “Monetary Policy in Ghana: Revisiting the Tobin’s Model”, examined the country’s macroeconomic struggles and offered a roadmap for fiscal and monetary transformation.
“The Bank of Ghana needs a more dynamic research ecosystem—one that taps into academic expertise to craft policies tailored to Ghana’s economic realities,” Prof. Yusif stated.
Rethinking Monetary Tools and Policy Targets
At the heart of Prof. Yusif’s proposal is a departure from inflation targeting, the long-preferred method used by central banks. He argued that Nominal GDP Targeting—which aims to stabilise the sum of real GDP growth and inflation—offers a more holistic approach that aligns better with national development goals.
“This model helps balance price stability with real economic growth,” he explained. “If properly implemented, it can foster labour market stability and a more resilient financial system.”
Lessons from Abroad, Failures at Home
Comparing Ghana’s post-independence economic trajectory with countries like South Korea, Malaysia, and Mexico, Prof. Yusif pointed out that while these nations pursued consistent and innovative economic reforms, Ghana remained hamstrung by macroeconomic instability, high inflation, and unsustainable debt.
He noted that Ghana’s current legal and policy frameworks—especially the Fiscal Responsibility Act (Act 982) and the Bank of Ghana Act (Act 612)—have failed to enforce genuine fiscal discipline.
“These laws may look solid on paper, but they haven’t delivered the accountability or sustainability they promised,” Prof. Yusif argued, adding that the government frequently exceeds the fiscal deficit threshold of 5% of GDP and misuses central bank borrowing provisions.
Collaborative Research: A Missing Piece
Beyond legislation, Prof. Yusif stressed the need for a formalised partnership between BoG and academic institutions, including KNUST, to build evidence-based policy grounded in local realities.
“A sound monetary policy must be driven by continuous, context-specific research—this is where universities can play a crucial role,” he said.
He identified research gaps in key areas such as the transmission mechanism of monetary policy, the effectiveness of monetary instruments, and the real drivers of Ghana’s economic growth—insights that, if addressed, could significantly enhance policymaking.
Toward Fiscal-Monetary Synergy
To make monetary policy truly effective, Prof. Yusif argued, Ghana must align fiscal strategy with central bank objectives. He recommended embracing Nordic models—specifically those of Norway and Sweden—which emphasise transparency, accountability, and responsible debt management.
He further suggested structural economic initiatives such as:
- Responsible mining policies
- Strengthened cocoa production
- Public-private partnerships (PPPs)
- Incentives for local businesses
A Call to Action
Prof. Yusif’s lecture was more than academic—it was a direct appeal to policymakers to rethink how Ghana crafts and implements its economic policies.
“Monetary policy does not exist in a vacuum,” he concluded. “We must integrate it into a broader national strategy that promotes sustainable development, fiscal discipline, and inclusive growth.”
