Dr. Paul Acquah to quit central bank in September
Long-serving Ghanaian central bank governor Paul Acquah is likely to quit next month, bank and other sources said on Wednesday, prompting speculation of tighter monetary policy in the emerging economy.
Acquah is credited with key reforms during an eight-year tenure such as the creation of an interest rate policy committee. But some people in the market will look to his successor for a more aggressive stance against inflation, which is hovering at 20 percent.
Brought in by former President John Kufuor in 2001, Acquah is tipped to be replaced either by a political ally of new President John Atta Mills, or by a newcomer from the private sector when his second four-year term expires next month.
“He has done a lot to enhance the independence of the system,” said a central bank source who declined to be named.
“But I will be surprised to see him remain in office because that has become the trend. It is a political game,” said the source, doubting that Acquah would push for a new term.
Acquah has for weeks declined to comment on his future. In April, Mills replaced one of his deputies in a reshuffle of the central bank’s board.
West African gold and cocoa exporter Ghana is due to become an oil exporter from 2010, and is one of the few sub-Saharan states to have launched a Eurobond.
But investors are concerned by the weakness of the cedi currency and the failure to rein in inflation exacerbated by high food prices. Ghana is also struggling with a budget deficit close to 15 percent of output, and with huge trade imbalances.
Acquah forecast in May that inflation would slow to 12.5 percent by the end of the year and hit 10 percent by end-2010. Since then, it has ticked up to 20.74 percent in June, with July’s figures due in the next few days.
The International Monetary Fund (IMF), which has built a medium-term inflation target of 7-9 percent into its $1 billion loan package for Ghana, last month recommended the bank match Mills’s budget austerity drive with a tighter monetary policy.
However, Acquah held the prime rate at 18.5 percent, arguing “risks in the outlook for disinflation and growth are balanced”.
MILLS ALLY IN THE FRAME
“Under the current or prospective future central bank governor, the markets would welcome a more activist statement of intent from the Bank of Ghana,” said Richard Segal at UBA Capital, urging specific statements on inflation targets.
At present, no front-runner has emerged as a successor.
Local media speculation has focused on Alhassan Andani, the head of Stanbic Bank Ghana, a unit of South Africa’s Standard Bank. Kwesi Amissah-Arthur, a Mills ally who was deputy finance minister under ex-president Jerry Rawlings, is also cited.
Yet to what extent any successor would usher in a revamp of policy is unclear.
Analyst Sampson Akligoh of Accra-based Databank Research cited Acquah’s introduction of a Monetary Policy Committee (MPC) system as one of several reforms that had enhanced the credibility of the bank as an independent institution.
Michael Hugman, a London-based emerging markets strategist with Standard Bank, played down the impact of personnel changes.
“We are confident with the institutions and policy direction of the current administration in Ghana, and therefore see little risk around changes to any individual policy-maker within government,” he said.