MPC skips press briefing, as concerns mount over ‘excessive’ FX involvement ahead of elections

The  Bank of Ghana (BoG) Monetary Policy Committee (MPC) is set to announce its latest decision today, Friday, November 29, 2024, at the end of its 121st meeting through a press statement – foregoing the customary press briefing.

The press briefing was originally  scheduled for Monday, December 2, 2024.

The move has raised questions among analysts and market watchers amid heightened scrutiny of the central bank’s role in managing the foreign exchange position ahead of next month’s general elections.

In a press statement on Tuesday, November 26, 2024, the BoG confirmed that it would not hold a press briefing following its policy meeting: a practice previously used to explain decisions and address questions from the public and media.

While no official reason was provided, market observers believe the decision reflects a strategic effort to maintain control over messaging during a period of heightened economic and political sensitivity.

“The Bank of Ghana MPC will release its decision via a press statement on Friday, November 29, 2024. Please note that there will be no press briefing. Thank you,” the message read.

Mounting FX concerns

The announcement comes at a time when the FX market has been under significant pressure, driven by pre-election demand for dollars, investor concerns over macroeconomic stability and growing criticism of central bank interventions in the currency market.

Critics, including some policy analysts and opposition politicians, have accused BoG of excessive involvement in the FX market to stabilise the cedi in the lead-up to the December elections.

Banking consultant Dr. Richmond Atuahene said he is not surprised by the development, stating that the key metrics are far from ideal.

“My candid opinion is that this is them being evasive because main variables are not good; inflation indicators are not good, currency depreciation is on the run. So, it’s better to issue a statement than to interact,” he told the B&FT.

The sentiments were echoed by Director of Research-Institute of Economic Affairs (IEA), Dr. John Kwakye, who raised concerns – especially about the FX developments.

“As the Bank of Ghana embarks on an exercise to appreciate the cedi a few weeks to the election, the world is watching its reserves reported to be US$7.5bn (3.4 months of imports) at the end of August,” he wrote in a post on X (formerly Twitter) on Thursday, November 28, 2024.

He also appeared to question the Bank’s independence, stating: “If BoG was capable of appreciating the cedi, why did  it have to wait till a few weeks before the election to do so? Whose interest is the Bank serving? The real test will come after the election”.

The cedi depreciated by 24.3 percent against the U.S. dollar from beginning of the year to September 25, 2024, according to latest central bank data. The cedi has however witnessed a slower pace of depreciation at 7.1 percent in second-half of the year. The central bank attributed this to “the still tight monetary policy stance and improved forex liquidity support”.

The cedi has rallied over the past three weeks – maintaining its upward momentum last week, supported by enhanced liquidity stemming from the BoG’s injection of US$199.8million into the market and supplemented by an FX inflow of US$21.55million from market participants.

This surge in liquidity enabled the local unit to recover 1.42 percent week-on-week against the USD, 3.03 percent against the GBP and 3.36 percent against the EUR. By end of the trading week, the cedi was quoted at a mid-rate of 16.79 per dollar, according to Databank.

Analysts however warn that the apparent stability could be temporary if reserves are being depleted to prop-up the currency.

Key issues on the agenda

The MPC meeting comes against a backdrop of rising inflation which stood at 22.1 percent in October, up from 21.5 percent in September and reversing months of gradual decline. The central bank’s policy rate, currently at 27 percent, is expected to remain a key tool in its efforts to rein-in inflation.

“As BoG conducts its last MPC meeting of the year this week, the Bank must justify its conduct of monetary policy in recent years. The  coexistence of a Policy Rate as high as 27 percent, inflation as high as 22 percent and depreciation as high as 26 percent so far this year makes a tough sell,” Dr. Kwakye, a one-time member of the central bank’s MPC, stated on the same platform.

“I think the central bank would not want to be asked why the high policy rate has failed to bring down inflation,” Dr. Atuahene said on the subject.

The meeting also coincides with government’s efforts to secure further disbursements under the International Monetary Fund (IMF) programme.