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Amend BoG Act to make economic growth, job creation main objectives of monetary policy – Nii Moi Thompson

A former Director General of the National Development Planning Commission (NDPC) Dr Nii Moi Thompson has called for the amendment of the Bank of Ghana Act in order to make economic growth and job creation the main objectives of the monetary policy.

In his view, the current approach to monetary policy is anti-growth and anti-jobs therefore, the Act must be changed to enable the central bank focus on job creation as well.

In a write up titled ‘Beyond the IMF’, he said ideally, employment and decent work, as defined by the International Labour Organization, should be the top-most objective of Ghana’s development agenda.

The 40-Year Plan by the NDPC recognised this and projected an annual average of 375,000 jobs, mainly in the private sector, compared to the 320,000 people who enter the labour force annually, for a total of 15 million jobs over the Plan period.

According to the Ghana Statsitical Service (GSS), there were 1.5 million unemployed Ghanaians in 2021, up from 1.2 million in 2016. Of those working, over 70% are in vulnerable employment, otherwise known as the working poor.

“Populist and impractical programmes such as those for ‘youth entrepreneurship’ have failed because not every unemployed youth is an entrepreneur waiting to be made. Most youth in fact require wage employment as their first entry into the labour market, and studies have shown that about 80% of new jobs are created by existing businesses,” he said.

Besides, he explained, countries with higher levels of wage employment tend to have lower levels of poverty with high degrees of economic formalisation.

“Creating 15 million jobs will be based on a three-dimensional integrated strategy of (1) Labour demand (economic growth), (2) Labour supply (skills development), and (3) Labour markets (laws and policies).

“The strategy in turn will be nested in a new framework for Local Economic Development (LED) based on business development, infrastructure development, and social development as part of an aggressive push to accelerate decentralisation. The Business Climate Survey pioneered by GIZ in some districts in 2009/2010 would be a useful complement.
However, the effective implementation of the strategy will require extensive institutional reforms, especially of the sector ministry, which has not had a single labour economist in decades and has been marginalised in the ministerial pecking order for just as long. The labour market information (LMIS), only partially developed after more than 15 years, must be finalised to provide quarterly labour market statistics on employment, wage growth, and other indicators in line with global best practice.

Alternative indicators, such as the employment rate, which measures the ability of the economy to absorb labour, should replace or supplement popular but misleading indicators like the unemployment rate, which is unsuitable for developing countries and can undermine employment policy by providing conflicting information about the labour market. To accelerate economic growth and labour demand, government should amend the Bank of Ghana Act to make economic growth and employment the primary objectives of monetary policy, followed by price stability, with the establishment of a labour economics department to guide policy. The current approach to monetary policy is anti-growth and anti-jobs.

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