When Johnson Pandit Asiama assumed office at the Bank of Ghana in February 2025, Ghana was still grappling with the aftershocks of a deep macroeconomic crisis.
Inflation had exceeded 50 per cent, the cedi had slumped, reserves were depleted and confidence in economic management had deteriorated sharply.
Fiscal imbalances had spilt into monetary policy, weakening the credibility of the inflation-targeting framework and exposing structural vulnerabilities in the economy.
Less than two years later, stability has tentatively returned. Inflation has fallen sharply, the exchange rate has firmed and external buffers have been rebuilt.
The shift reflects a combination of orthodox policy tightening, selective innovation and a more deliberate effort to restore institutional credibility.
Yet the recovery remains uneven, and in important respects contingent on both domestic discipline and favourable external conditions.
Disinflation
The disinflation has been striking. Headline inflation dropped to 5.4 per cent by December 2025—below the central bank’s 6–10 per cent target band—and fell further to 3.3 per cent by February 2026, its lowest level in more than three decades.
While this underscores the effectiveness of policy adjustment, part of the decline reflects base effects and easing global price pressures.
The key question is whether underlying inflation dynamics have been durably reset or merely suppressed.
Policy has evolved in distinct phases. An initial period of tight monetary conditions, reinforced by fiscal consolidation under an IMF-supported programme, helped anchor expectations and stabilise the currency.
As inflation subsided, the central bank cut its policy rate aggressively, reducing it by a cumulative 14 percentage points to 14 per cent by March 2026.
Caliberated
However, the easing cycle has been carefully calibrated rather than expansionary. Liquidity conditions have remained relatively tight, with reserve money contracting slightly year on year and broad money growth slowing significantly.
This reflects a deliberate attempt to loosen the price of credit without materially increasing its quantity—an approach aimed at preventing excess demand from spilling into the foreign exchange market.
It also suggests a recognition that in Ghana’s recent experience, exchange rate stability is a primary anchor for inflation outcomes.
That trade-off has been central to the cedi’s recovery. After a period of pronounced weakness, the currency appreciated by more than 40 per cent in 2025.
The rebound reflects improved external balances, tighter monetary conditions and a restoration of policy credibility, but it also represents a partial correction from earlier overshooting.
Maintaining this stability without eroding export competitiveness or encouraging import dependence will be a central policy dilemma.
Communication has been more disciplined than in previous cycles. Early in 2026, Mr Asiama characterised the preceding year as one of restoring stability and rebuilding confidence, signalling a shift towards predictability and forward guidance.
In a market where expectations can shift rapidly, clearer signalling has helped anchor sentiment and reduce volatility in both inflation and exchange rate expectations.
Reserve management has also become more active and, in some respects, more experimental.
A state-backed mechanism to channel gold export proceeds into the financial system has boosted foreign exchange inflows and reduced leakages, while direct gold purchases from mining companies have strengthened reserve accumulation.
The strategy reflects an effort to better align reserve policy with Ghana’s commodity endowment, reducing reliance on external financing.
Reserves
As a result, reserves rose to about $13.8bn in early 2026, equivalent to roughly six months of import cover, while the current account shifted into a sizeable surplus.
These improvements mark a significant turnaround from the crisis period, though they remain partly dependent on elevated gold prices and favourable terms of trade.
The central bank’s decision to sell part of its gold holdings for foreign currency earlier in 2026 illustrated the constraints inherent in such a strategy.
The move drew criticism at the time, given rising gold prices, but has since appeared less contentious as prices moderated.
Officials have framed the decision as a liquidity-driven rebalancing rather than a directional bet on gold, highlighting the trade-off between asset valuation and immediate usability in reserve management.
Attention is now shifting to the financial sector, where vulnerabilities exposed by the crisis have yet to be fully resolved.
Banks continue to contend with the legacy of the 2023 domestic debt restructuring, which weakened capital buffers and constrained lending capacity.
The central bank is close to completing a recapitalisation process aimed at restoring minimum capital levels, a necessary step towards reactivating credit to the private sector.
Regulatory
Regulatory policy has tightened, with increased emphasis on prudential standards, governance and risk management.
At the same time, the authorities are preparing a framework to regulate digital assets and cryptocurrencies, reflecting the growing importance of alternative financial channels, particularly in cross-border payments and remittances.
Bringing these activities within the regulatory perimeter is intended to reduce systemic risks while supporting innovation.
Institutional reform remains a critical pillar of the agenda. Efforts to strengthen the central bank’s operational independence and repair its balance sheet—damaged during the crisis and subsequent restructuring—are central to rebuilding credibility.
Without such reforms, the risk of fiscal pressures once again undermining monetary policy would remain significant.
The next phase—described by policymakers as one of consolidation and discipline—will be more demanding.
External risks, including higher oil prices, geopolitical tensions and tighter global financial conditions, could test the resilience of recent gains.
Domestically, sustaining fiscal consolidation while supporting growth will require careful coordination between monetary and fiscal authorities.
More fundamentally, the challenge will be to convert macroeconomic stabilisation into durable, broad-based growth.
This will depend on restoring credit flows, improving financial intermediation and ensuring that lower inflation and interest rates translate into productive investment rather than renewed consumption-led imbalances.
The Bank of Ghana has, for now, engineered a measure of stability from a position of acute stress.
The policy mix under Mr Asiama appears more coherent than in the recent past, combining discipline with selective innovation. But the durability of this stabilisation will hinge on consistency—particularly in resisting pressures to ease prematurely or to accommodate fiscal slippages.
For now, the gains are real but not yet entrenched. The coming period will determine whether Ghana’s recovery marks a cyclical rebound or the beginning of a more durable macroeconomic reset.
Source:
www.graphic.com.gh
