Domestic inflation has fallen faster than many expected, easing to 5.4 percent in December 2025 from 23.8 percent a year earlier, according to the Ghana Statistical Service (GSS).
This drop, the lowest since the Consumer Price Index (CPI) – the ‘basket of goods and services’ which measures inflation – was rebased in 2021, has reset expectations across markets, households and policy circles.
Borrowing costs are easing as the Bank of Ghana (BoG) has continued to cut its primary rate, while the cedi ended the year stronger than many forecasts suggested.
Yet the economy’s managers have refused to be carried away by the applause, aware of similar sentiments in the nation’s past. Rather, they are acutely aware that the hardest work may only be starting.
History in Ghana and across emerging markets shows that sustaining low inflation as growth resumes and policy loosens is more difficult than achieving the initial disinflation.
The risk is not a sudden reversal but gradual slippage, through fiscal pressure, credit expansion and renewed demand if discipline weakens.
Speaking at the University of Ghana’s 77th Annual New Year School and Conference, BoG Governor Dr Johnson Pandit Asiama described the past year as a necessary stabilisation phase rather than an endpoint.
Inflation, foreign exchange buffers and confidence had deteriorated sharply entering 2025, leaving little room for error. Restoring stability, he said, was a national necessity rather than a technocratic choice.
“The results are now evident,” Dr Asiama told the conference, pointing to single-digit inflation and a rise in gross international reserves to about US$13.8billion – equivalent to nearly six months of import cover.
But he stressed that stability should be seen as a foundation for reform, not a destination.
“Stability, however, is not the destination. It is the foundation,” he said, as he reinforced a shift in focus from crisis response to consolidation.
That message has become a recurring theme in the central bank’s recent communications.
After maintaining the policy rate at restrictive levels through much of 2024 and early 2025, the apex bank began a calibrated easing cycle as inflationary pressures moderated and inflation expectations started to re-anchor.
The Monetary Policy Rate (MPR) was reduced in successive steps from 27 percent to 18 percent by November 2025.
Financial markets responded in tandem. Market interest rates, as captured by the Ghana Reference Rate (GRR), adjusted downward; reflecting the easing of monetary conditions and improving liquidity across the financial system.
This transmission helped lower borrowing costs and supported a cautious recovery in private-sector credit. The GRR declined from 29.72 percent in January 2025 to 15.9 percent by December 2025 before edging down further to 15.68 percent, effective January 7, 2026.
Still, Dr Asiama has been careful to frame the easing cycle as conditional.
During a courtesy visit by Otumfuo Osei Tutu II, he warned against mistaking recent gains for permanence.
“Exchange rate stability is not something that can be declared; it must be earned continuously,” he said, adding that a currency remains strong only when the economy beneath it is productive, competitive and disciplined.
The cedi’s performance illustrates both progress made and risks ahead. The currency ended 2025 at about GH¢10.67 per US dollar, placing it among the stronger performers in Africa after a volatile period.
The improvement reflected tighter monetary policy, improved reserves and better sentiment. But the Governor described the outcome as a responsibility rather than a victory, underscoring a need for fiscal restraint, export growth and long-term planning.
Cedi trades at GH¢10.70 to US$1 on January 12
Beyond the headline inflation numbers, the central bank has been strengthening its policy framework to limit the risk of renewed slippage.
Over the course of 2025, BoG tightened liquidity management operations, sharpened policy signalling to anchor expectations more firmly and reinforced discipline in the foreign exchange market.
Together, these measures enhanced the credibility of monetary policy and improved transmission – helping to stabilise macroeconomic conditions and reduce vulnerabilities going forward.
One key reform redirected foreign exchange inflows from the mining sector through commercial banks to deepen interbank liquidity and improve price discovery.
Net Open Position limits were recalibrated and a new foreign exchange operations framework was introduced to align with international best practice.
“These reforms are helping to restore confidence in the FX market and anchor expectations,” Dr Asiama said, noting that the objective is to accumulate reserves while mitigating excessive short-term volatility rather than defend a particular level of the currency.
Financial sector resilience has also been a priority. Supervisory oversight was tightened, capital and liquidity buffers strengthened and governance standards raised at board level as non-performing loans declined.
The central bank upgraded its crisis-management architecture, elevating its resolution function into a dedicated Resolution and Restructuring Department and advancing recovery and resolution planning under Act 930.
The emphasis on institutional hardening reflects lessons from the less-than-a-decade-old banking sector clean-up, when delayed intervention amplified costs.
Dr Asiama said potential distress must be addressed early and in an orderly manner, without undermining confidence in the wider system.
Beyond banks, the authorities have focused on the infrastructure that underpins modern financial activity. Reforms in payments and financial services have targetted interoperability, remittance transparency and oversight of digital credit providers.
Corporate governance standards have been introduced for payment service providers and electronic money issuers, while changes to the inward remittance framework aim to improve traceability of foreign exchange inflows and support confidence in the cedi.
Passage of the Virtual Asset Service Providers Act, designating the Bank of Ghana and Securities and Exchange Commission as joint regulators, adds another layer to the resilience agenda.
Policymakers argue that as financial activity becomes increasingly digital, stability depends as much on uninterrupted payment rails as on balance sheets.
Outlook
Markets have responded positively to the stabilisation narrative, but investors are increasingly focused on what comes next.
Black Star Group, an investment research firm, describes 2026 as a “growth pivot” year, with the economic story moving beyond the inflation fight toward a new macro regime.
With inflation retreating to single digits and global central banks shifting toward neutral settings, the firm expects real returns on short-term government paper to compress, encouraging a rotation into other assets.
In its 2026 outlook, Black Star Group projects average Gross Domestic Product (GDP) growth of 5.6 percent, above the Ministry of Finance’s 4.8 percent target and expects inflation to average around eight percent as demand-pull pressures are offset by lower global oil prices and a relatively stable cedi supported by gold receipts.
The firm forecasts a controlled depreciation of nine percent to 11 percent, with the exchange rate ending the year between GH¢12.6 and GH¢12.8 per US dollar.
The outlook also anticipates aggressive policy rate cuts in the first half of 2026 to realign the transmission mechanism, given the wide gap between the 18 percent policy rate and Treasury bill yields of about 10.6 percent – followed by a pause as fiscal liquidity enters the system through government’s investment programme.
Such forecasts underscore the delicate balance policymakers face. Faster growth and easier financial conditions can support recovery, but they also raise the risk of overheating if fiscal discipline weakens or external conditions turn less favourable.
That concern is echoed in assessments by the International Monetary Fund, which completed its fifth review of Ghana’s programme under the Extended Credit Facility in late 2025.
The review unlocked an additional SDR 267.5 million – bringing total disbursements to about US$2.8billion – and found programme implementation broadly satisfactory, with all end-June performance criteria met.
However, the IMF flagged downside risks tied to commodity price volatility, confidence effects from policy slippages and delays in completing Ghana’s debt restructuring.
It emphasised the need to sustain macroeconomic adjustment, advance fiscal consolidation while protecting vulnerable groups, maintain a prudent monetary stance and strengthen governance and transparency.
For BoG, those risks reinforce the argument that consolidation, not celebration, should define the next phase. Asiama told the New Year School that 2026 would mark a shift from restoration to embedding reforms more deeply into routine practice.
Supervision is expected to become more risk-based and preventive, while resolution and financial infrastructure reforms move from design to operational maturity.
The broader message to markets is that the central bank is seeking to make stability predictable rather than discretionary.
In earlier cycles, Ghana’s disinflation gains were often reversed as fiscal pressures mounted and policy coordination weakened. This time, officials argue, the institutional scaffolding is stronger.
Whether that proves sufficient will depend on choices beyond the central bank. Governor Asiama has repeatedly stressed that monetary policy cannot substitute for fiscal restraint, productive investment and export competitiveness.
During his remarks to the Asantehene, he framed sustainability as a matter of national conduct rather than technical adjustment.
“Sustainability rests on deeper choices: fiscal restraint instead of excess, production over consumption, exports over imports and long-term thinking over short-term comfort,” Dr Asiama said.
Source:
www.ghanaweb.com