Dr. Johnson Asiama, Governor of the Bank of Ghana (BoG), has acknowledged a gradual easing in inflation but stressed that it remains uncomfortably high, exceeding 23%. Speaking at the 123rd sitting of the Monetary Policy Committee (MPC) on Monday, March 24, he painted a nuanced picture of Ghana’s economic landscape, highlighting both progress and persistent challenges.
Slow Progress Amid Structural Challenges
Dr. Asiama noted that while inflationary pressures are moderating, the month-on-month decline has been slow. Food inflation, a significant driver of overall inflation, remains stubbornly high due to structural inefficiencies. On the global front, he warned of emerging risks, stating:
“We’ve seen a strong trade surplus and solid reserve build-up driven by gold exports and remittance flows. However, escalating global tariff wars, geopolitical tensions, and weakening Chinese demand could disrupt these gains. Such global dynamics could spill over into domestic inflation, capital flows, and exchange rate stability.”
Fiscal Expansion and Early Signs of Recovery
Domestically, Dr. Asiama described the fiscal landscape in 2024 as expansionary, with a deficit exceeding program targets. Encouragingly, early 2025 has shown signs of fiscal consolidation, though he expressed caution about the sufficiency of current measures to meet upcoming IMF program reviews and stabilize expectations.
Evolving Financial Conditions and Concerns
He highlighted evolving financial conditions, pointing to increased liquidity and commercial banks’ concerns over the Capital Requirements Regulations (CRR) framework. These developments, he said, demand careful monitoring to assess their impact on inflation, foreign exchange demand, and credit growth.
Private sector credit is recovering nominally, but real credit growth remains muted as banks remain cautious amidst lingering Non-Performing Loan (NPL) challenges. Nonetheless, the microfinance and rural banking sectors are showing early signs of stabilization, albeit with the need for continued recapitalization and regulatory reforms to sustain confidence.
Learning from Past Missteps
Reflecting on past policy challenges, Dr. Asiama called for introspection:
“Some of today’s challenges stem from earlier monetary and fiscal policy missteps—loose fiscal policies during macroeconomic stress, weak monetary-fiscal coordination, and delays in structural reforms. These factors elevated inflation, impaired policy transmission, and eroded credibility. It is essential to reflect on these issues, not to assign blame but to strengthen our institutions and avoid repeating past mistakes.”
Addressing Deeper Structural Issues
The Governor emphasized the need to tackle long-standing structural issues, such as underinvestment in agriculture, persistent exchange rate misalignments, and the shallowness of domestic financial markets. While these challenges fall outside the scope of immediate monetary policy decisions, he underscored their importance in shaping the medium-term policy landscape.
Balancing Risks and Opportunities
Dr. Asiama acknowledged the convergence of risks, including stubborn inflation, elevated liquidity, soft real interest rates, a fragile fiscal recovery, and growing external uncertainties. However, he also highlighted buffers such as robust reserves, improving investor sentiment, and the credibility of Ghana’s policy framework.
“Our task over the next few days is to rigorously weigh these developments and reach a policy stance that reinforces the disinflation path without undermining recovery or destabilizing market expectations. I trust our discussions will be candid, evidence-based, and guided by our shared mandate of maintaining price stability and supporting sustainable growth.”
With these remarks, Dr. Asiama officially opened the 123rd MPC meeting, inviting the team to commence with a macroeconomic briefing. His address set the stage for critical discussions aimed at navigating Ghana’s complex economic landscape while safeguarding stability and growth.
Story by: Mercy Addai Turkson #ahotoronline.com
