By Kodjo Adams, GNA
Accra, Oct. 6, GNA – Dr Adamu Braimah Abille, Policy Analyst at the Integrated Social Development Centre (ISODEC), has urged the Bank of Ghana (BoG) to shift its monetary policy focus from interest rates to the quantity, quality and allocation of credit to drive economic activity and control inflation.
He said conventional assumptions underpinning monetary policy, including the belief that banks merely intermediated existing money and that higher interest rates effectively controlled inflation and economic activity, required closer scrutiny.
Dr Abille made the call at a stakeholder consultation forum on Alternative Economic Models for Ghana, organised by ISODEC in partnership with the International Development Economics Associates (IDEAS).
Presenting on monetary policy and banking, he identified three key assumptions requiring review: the role of banks as financial intermediaries, the relationship between interest rates and economic growth, and the quantity theory of money.
He said commercial banks did not simply take deposits from savers and lend them to borrowers, but created new money when they extended credit.
“When a bank grants a loan, it credits the borrower’s account without necessarily transferring funds from another customer’s account or drawing down existing reserves,” he said.
Dr Abille said that suggested that bank lending could create new purchasing power in the economy.
He also challenged the assumption that lower interest rates necessarily stimulated economic growth while higher rates constrained it.
Citing analysis of Ghanaian and South African data, he said the evidence did not establish a stable relationship between interest rates and economic growth.
He said quantity constraints could be more important than the price of money in determining economic activity, noting that high interest rates could raise borrowing costs, reduce productive investment and coexist with high inflation.
On the quantity theory of money, Dr Abille questioned the assumption that the velocity of money remained constant and that changes in money supply necessarily translated into corresponding changes in prices and economic output.
He, therefore, proposed a monetary policy framework that placed greater emphasis on the allocation and quality of credit, including a shift from predominantly inflation and interest-rate targeting towards credit quantity and quality targeting.
Dr Isaac Abotebuno Akolgo, an Economist at IDEAS, called for stronger government and central bank intervention to stabilise food prices and create reliable markets for farmers and food producers.
He said the proposal included three possible financing models to support the food sector while ensuring producers had dependable markets and consumers were protected from excessive price volatility.
Mr Charles Abugre, the Executive Director of IDEAS, said the Bank of Ghana’s intervention in the gold sector through the GoldBod was significant because it provided liquidity to support gold purchases without relying solely on government borrowing.
Mr Sam Danse, Executive Director of ISODEC, said the forum was expected to generate concrete policy inputs to improve the proposed models for possible implementation.
GNA
Edited by Agnes Boye-Doe
6 Oct. 2026
Reporter: Kodjo Adams
Email: [email protected]