By Toma Imirhe
Dr Johnson Asiama, the Governor of the Bank of Ghana, who doubles as the Chairman of the central bank’s Monetary Policy Committee (MPC) has confirmed that it is deliberately pursuing a prudent balance between a tight monetary regime to protect the recent macroeconomic gains with regards to the taming of inflation and consequent interest rates as well as exchange rate stability on the one hand and growth-supportive monetary expansion on the other.
The Bank of Ghana chieftain revealed this on Wednesday, January 28, when announcing the latest 250 basis points cut in the benchmark Monetary Policy Rate, which the MPC has lowered to 15.5% from the erstwhile level of 18% at which it was held over the past two months. This brings the cumulative cut in the MPR since July last year – at which time it was 28% – to 1,250 basis points, and its new level is the lowest in the past four years, since Ghana’s now receding macroeconomic crisis erupted during the second half of 2022, sending inflation and interest rates spiraling upwards.
Dr Asiama recognizes the dangers that rising liquidity poses to inflation and exchange rate stability. Indeed, cheaper credit, resulting from the sharp fall in lending rates, which could be used to buy sharply cheaper foreign exchange, resulting from the cedi’s record-breaking appreciation last year, holds the potential to significantly increase demand for forex for importation. Such demand pressure for forex could cause renewed currency depreciation, which in turn would re-ignite inflationary pressures.
However, the BoG Governor reveals that the central bank is also intent on supporting economic growth, which can support “stronger real sector recovery, job creation, and improved financial intermediation.”
Striking a balance between the two is technically challenging, but to its credit, the BoG seems to be getting it right.
In 2025 the cedi recorded an appreciation of 40.7% against the US dollar, compared with a depreciation of 19.2% in 2024; which was key in achieving a much sharper than anticipated decline in headline inflation from 23.8 % in December 2024 to 5.4% in December 2025. In turn, this enabled lending rates to decline substantially as wel,l with average lending rates falling to 20.45% from 30.25%. This supported a rebound in real private-sector credit growth to 13.1% from 2.0% in 2024.
This was achieved largely by the BoG’s tight monetary growth management, maintained in the background while its sharp interest rate cuts dominated the headlines. Growth in monetary aggregates moderated, reflecting the relatively tight policy stance in the year. Reserve money grew by 12.5%, significantly lower than the 47.8% recorded in 2024, mainly due to increased sterilisation efforts, primarily through the issuance of competitively priced BoG bills. Broad money supply growth also declined to 16.5% from 31.9% over the same comparative period.
Importantly, the improved macroeconomic operating environment for both government, private enterprise and households alike – coupled with increased credit from the commercial banks – has increased Ghana’s Gross Domestic Product growth rate. The latest data from the Ghana Statistical Service showed that overall Real GDP expanded at an annual rate of 6.1% during the first three quarters of 2025, relative to 5.8% during the corresponding period in 2024. Similarly, non-oil GDP grew by 7.5% from 5.8% over the same comparative period.
Going forward, Dr Asiama hints that the tight lid on liquidity expansion will be loosened to accelerate job and income-generating economic activity even further. But this will be done with great caution, using the recently reintroduced 14-day BoG bills to closely manage liquidity in the economy and its effects.
“The latest forecast and six-months ahead survey-based inflation expectations indicate that headline inflation is broadly expected to be within the medium-term target, barring potential spillover risks from upward adjustments in utility prices and commodity market volatility,” Dr Asiama has revealed.
“GDP growth is expected to remain strong in 2026, with the output gap narrowing. While this may introduce moderate demand-side pressures, the Committee judged that current monetary conditions remain tight relative to prevailing inflation dynamics”
Source: GhanaNewsOnline