The 2002 Bank of Ghana (BoG) Act created the Bank of Ghana and establishes its independence from government manipulation. It also created the conditions for the establishment of the Monetary Policy Committee, which is responsible for developing and implementing monetary policy. At present the primary goal is price stability, and the principle method for achieving this goal is a form of inflation targeting. According to the 2007 Article IV Consultations report of the International Monetary Fund (IMF), the BoG has improved transparency and public accessibility of monetary policy decisions and data with the regular publication of Monetary Policy Committee statements and other statistical releases on its website. However, issues of timeliness, quality, and reliability of data upon which policy is based remain to be addressed. Overall, there is insufficient publicly available information regarding Ghana's compliance with the IMF's Monetary Policy Transparency Code.

General Overview

In the International Monetary Fund's (IMF) 2007 Article IV Consultations report, Ghana's monetary policy was described as a variant of inflation targeting, which the Bank of Ghana (BoG) has developed with the assistance of the Bank of England. The IMF report found that many of the prerequisites for such a policy were already in place, including independence of the central bank, the availability of liquidity instruments, the creation of a monetary policy committee, and procedures for both modeling and forecasting inflation. However, the report noted that an adequate communications strategy is so far only "partly in place" (p. 11). A deliberate move by the government to limit the BoG's role in financing the deficit has helped to alleviate the possibility of fiscal dominance over monetary policy. In addition to inflation targeting, the IMF notes that there is a secondary monetary goal of keeping the Ghanaian currency linked to the U.S. dollar in effect, and cautions that greater flexibility in this area would be better advised. The IMF staff did concede that the current exchange rate was "broadly in line with macroeconomic fundamentals" (p. 11), and that the appreciation of the value of the currency (the cedi) was not, at present, a cause for concern. The report did mention, in passing, that greater monetary framework clarity would be desirable, particularly in the context of recent inflation reduction efforts, since the inflation was deemed to be due primarily to price shocks. At present, the monetary policy regime is aimed toward reducing Ghana's inflation rate to 2.5% by the year 2012. Overall, the 2007 IMF report states that Ghana has shown commitment in improving its performance in the monetary policy arena, having instituted reforms in accounting and auditing (in 2002 and 2003), resolving issues in the foreign exchange and government securities markets as well as in the banking system in 2003, in accepting technical assistance from the World Bank in 2004, and in instituting improvements in monetary operations, banking supervision, and payment systems in 2005.

While the IMF 2007 report noted that Ghana continues to have issues with timeliness, coverage, and reliability with regard to its statistical reporting, it stated that the BoG has begun online publication of a number of documents that help address this problem. For instance, the BoG regularly posts the Monetary Policy Committee statement, as well as a number of statistical releases and a monthly monetary series covering the years 2001 through 2006. There are, however, reporting delays of as much as 4 to 6 weeks, which remain problematic. However, according to the report, a technical assistance mission worked with Ghana in 2002, when it judged that the "bridge table," by which Ghana automatically generated its international reserves and monetary variables, to be "complete and reliable" (p. 57). Since then, with the adoption of the Budget and Public Expenditure Management System (BPEMS), the BoG has revised that table to accommodate classification changes. The IMF found these revisions to be helpful in facilitating budget reconciliation and tracking. However, the IMF did find that there are deficiencies in the reporting provided by Ghana's commercial banks. This is being handled by the development of a new, standardized reporting form. The reports submitted by the BoG to the IMF are done using the IMF's standardized reporting form, according to the 2007 Fund report, which adds "an April 2007 [statistical/technical] mission is assisting the authorities in the finalization of the [standardized report form] reporting, expansion of the coverage of depository corporations to include discount houses, the building society, rural banks and credit unions, and in launching the collection and compilation of financial statistics with a view to compile a comprehensive financial corporation survey" (p. 57).

According to the Bank of Ghana's most recent (2006) Annual Report, efforts to enhance transparency have included the publication of its interest rates and charges both on the website and in newspapers. The BoG was also working to establish credit pricing system based on an annual percentage rate, to be implemented in 2007. This would permit customers to understand the full costs of borrowing.

The Principles

Clarity of roles, responsibilities and objectives of central banks.

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In 2003, the IMF conducted an update to an earlier (2000-2001) Financial Systems Stability Assessment (FSSA). According to the update, the Bank of Ghana Act of 2002 created the BoG and guarantees its independence. At the time of the law's passage, the primary goal of the BoG was to ensure price stability. The law also set the stage for the formation of Ghana's Monetary Policy Committee, which is charged with determining the monetary policy stance. The FSSA update also reported on improvements in Ghana's monetary policy instruments, including the adoption of a central bank prime rate, which permits greater flexibility for interest rates, rendering them no longer dependent solely on market forces. However, the available information does not directly address Ghana's compliance with this principle.

By the provisions of the Bank of Ghana Act (2002), the BoG as an institution answers to an appointed Board of Directors headed by the governor of the bank. The board is not answerable to any government oversight. The Act also provides the Monetary Policy Committee with functional independence. Members of the committee include representatives of the government, and meet bi-monthly to formulate policy. The Act relieves the BoG from excessive participation in lending to the government by establishing a limit of 10% of total bank revenues per year. The Act sets the BoG up as the government's banker and fiscal agent, and creates a general reserve fund.

According to the BoG website, the Bank's primary objectives include currency stability and the regulation of the payments system, as well as to effect monetary policy. The website notes that, in 2004, a new Monetary Policy Analysis and Financial Stability Department was created. The responsibility of this new department is to provide technical support to the Monetary Policy Committee.

Open process for formulating and reporting monetary policy decisions.

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Ghana's monetary policy is focused on price stability, as mandated by provisions of the Bank of Ghana Act of 2002. While the 2007 IMF report noted that Ghana continues to have issues with timeliness, coverage, and reliability in its statistical reporting, it stated that the BoG has begun the online publication of a number of documents that help address this problem. For instance, the BoG regularly posts the Monetary Policy Committee statement, as well as a number of statistical releases and a monthly monetary series covering the years 2001 through 2006. There are, however, reporting delays of as much as 4 to 6 weeks, which remain problematic. A technical assistance mission worked with Ghana in 2002, when it judged that the "bridge table," by which Ghana automatically generated its international reserves and monetary variables, to be "complete and reliable" (p. 57). Since then, with the adoption of the BPEMS, the BoG has revised that table to accommodate classification changes. The IMF found these revisions to be helpful in facilitating budget reconciliation and tracking. However, the IMF did find continued deficiencies in the reporting provided by Ghana's commercial banks. This is being handled by the development of a new, standardized reporting form. However, the available information does not directly address Ghana's compliance with this principle.

Public availability of information on monetary policy.

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Ghana is not a subscriber to the IMF's Special Data Dissemination Standard, but participates in the General Data Dissemination System (GDDS). According to the IMF's 2007 Article IV Consultations report, Ghana provides data to the Fund that are "adequate for surveillance purposes" (p. 55). However, problems remain in the areas of quality and timeliness. The report also found that there is insufficient disclosure of data to the public, although the Bank of Ghana has taken steps to address this problem by posting the statements of the Monetary Policy Committee, as well as publishing other statistical reports. Government finance data were last provided for inclusion in the "International Financial Statistics" in 1998, and the data for national accounts dated back to 1997. The latest data provided for publication in the Government Finance Statistics Yearbook date to 2004. However, the available information does not directly address Ghana's compliance with this principle.

Accountability and assurances of integrity by the central bank.

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According to the 2007 IMF Article IV Consultations report, a technical assistance mission assessed the bridge table used in 2002 to develop international reserve and monetary variable data from the financial accounts of the BoG and found the results to be "complete and reliable" (p. 57). Changes were introduced in the data on government accounts held at the BoG in 2003, when the BPEMS was introduced, and the bank revised its bridge table accordingly. This move, according to the IMF report, has facilitated the reconciliation and tracking of budget data. However, the IMF 2007 report found that commercial bank data was of inadequate quality, "especially in the treatment of foreign-currency-denominated assets and liabilities, and in the reporting of government securities" (p. 57). In response to this problem, a standardized reporting form was developed and was put into use in July of 2003. However, the available information does not directly address Ghana's compliance with this principle.