He pointed out that 2024 is an election year, which will likely lead to increased spending and potentially a slight rise in inflation, hence his prediction.

The BoG, on Monday, January 29, 2024, lowered its Monetary Policy Rate by one percent. In effect, the rate that commercial banks use as a reference for lending has been reduced from 30 to 29 percent after six months.

The rate has remained at 30 percent since July 2023 to keep inflation under control.

At its 116th monetary policy announcement, the Bank of Ghana cited a significant decline in inflation, a stable currency, and relatively strong economic growth on both the domestic and global fronts as reasons for the cut.

However, in an interview on The Point of View on Citi TV, Mr. Arkaah suggested that it’s not beneficial for the BoG to lower the interest rate.

He predicted, “The exchange rate has somehow stabilized, still depreciating, but at a much lower pace. I don’t think the Bank of Ghana is likely to cut the [monetary policy] rate at the next meeting or the following meeting after that. The reasons are the following: we are in an election year and it’s an all-political economy. The election is going to see increased spending, which means inflation is likely to take up slightly. I don’t think it’s in the best interest of the economy for the Bank of Ghana to be cutting interest rates at this point.”

He questioned Ghana’s ability to implement negative interest rates, a practice seen in developed countries like Japan.

The economist believes that offering investors a real return is the most effective way to generate revenue.

“Japan is running negative interest rates; I don’t think Ghana should be thinking about implementing negative interest rates or anything like that. We are not there.”

“The only way to generate revenue is to provide investors with a real return. The investors are looking at an inflation rate of 23.2%, and you have to get Treasury bills higher than that. The growth return you are talking about is 12% to the investors, that is going to attract investors,” he suggested.