By Elizabeth PUNSU, Kumasi
An economics professor at Kwame Nkrumah University of Science and Technology (KNUST), Professor Mohammed Hadrat Yusif, has proposed a shift in Ghana’s monetary policy framework – from the current inflation-targetting model to nominal GDP targetting – as a more effective approach to achieving macroeconomic stability.
Delivering his professorial inaugural lecture in Kumasi on the theme ‘Monetary policy in Ghana: Revisiting Tobin’s Model’, Prof. Yusif argued that targetting nominal GDP -which combines inflation and real GDP growth – would offer a more balanced and growth-oriented role for monetary policy.
He contended that such a framework would better support real GDP growth, stabilise the labour market and strengthen the country’s financial system.
Prof. Yusif emphasised that monetary policy must be aligned with Ghana’s broader macroeconomic goals. He called for a comprehensive review of key fiscal laws, including the Fiscal Responsibility Act, 2018 (Act 982) which limits the fiscal deficit to no more than 5 percent of GDP and Bank of Ghana Act, 2002 (Act 612), which restricts central bank financing of government to 10 percent of total annual revenue.
“These legal provisions have not effectively compelled governments to exercise fiscal discipline,” Prof. Yusif stated, stressing that enhanced fiscal governance is crucial to the success of any monetary policy regime.
He recommended Ghana consider governance models adopted by countries such as Norway and Sweden, particularly in the areas of transparency, accountability and prudent debt management.
To enhance the synergy between fiscal and monetary policy, he advocated greater support for responsible mining, enhanced cocoa production, stronger public-private partnerships and growth of local businesses.
Prof. Yusif also underscored the importance of evidence-based policymaking. He proposed a strategic research partnership between the Bank of Ghana and academic institutions such as KNUST to investigate determinants of economic growth, evaluate transmission mechanisms of monetary policy and assess the effectiveness of existing policy instruments.
“A strong research partnership between the Bank of Ghana and universities like KNUST is not just desirable – it is necessary. This is how we ensure that policy decisions are not only technically sound but also contextually relevant,” he remarked.
Reviewing Ghana’s post-independence economic performance, Prof. Yusif drew comparisons with peer countries such as South Korea, Malaysia and Mexico. He observed that while these nations have achieved sustained growth and macroeconomic stability, Ghana continues to struggle with inflation, fiscal imbalances and unsustainable public debt.
He concluded by reiterating that the adoption of nominal GDP targetting – alongside institutional reforms and research-led policymaking – could help Ghana build economic resilience and secure long-term macroeconomic stability.
