On 4 February 2026, Government Statistician Dr Alhassan Iddrisu stood before the press in Accra and delivered what sounded like unambiguously good news: Ghana’s inflation had fallen to 3.8 per cent in January, the lowest since the Consumer Price Index was rebased in 2021. It marked the thirteenth consecutive month of decline. Ministers celebrated. Newspapers proclaimed triumph. International observers pointed to Ghana as evidence that IMF stabilisation programmes work.
But in the same week, economist Dr Samuel Addo published a sobering counterargument that deserves far more attention than it’s received: “Low inflation in this case is not coming from higher productivity or better local production. It is coming from weak demand. People simply cannot afford to spend as much as before.”
Here lies the uncomfortable truth that Ghana’s policymakers would rather not confront. The country’s inflation achievement isn’t evidence of economic strength. It’s a symptom of economic stagnation dressed up as macroeconomic success. Ghana isn’t experiencing healthy price stability. We’re watching demand collapse in real time, and mistaking the wreckage for recovery.
The Mirage of Stability
The numbers appear remarkable. Inflation dropped from 5.4 per cent in December 2025 to 3.8 per cent in January 2026, representing a 19.7 percentage point decline from the 23.5 per cent recorded in January 2025. Food inflation eased to 3.9 per cent whilst non food inflation similarly fell to 3.9 per cent. Regional variations ranged from deflation of minus 2.6 per cent in Savannah Region to 11.2 per cent inflation in North East Region, but the national trajectory points decisively downward.
Ghana’s inflation now sits well below the Bank of Ghana’s medium term target of 8 per cent. The central bank has responded by cutting its policy rate from 30 per cent in mid 2023 to 15.5 per cent in January 2026. Treasury bill rates have plummeted from over 30 per cent at end 2024 to approximately 11 per cent in 2025. The trade balance posted a surplus of $8.5 billion by end October 2025, up from $2.8 billion a year earlier. The cedi appreciated 40.7 per cent against the US dollar in 2025.
By every conventional macroeconomic indicator, Ghana appears to be experiencing textbook stabilisation success. The IMF programme seems to be working precisely as designed. What’s not to celebrate? Everything, as it turns out.
The Demand Collapse Nobody’s Discussing
The critical distinction that policymakers are deliberately obscuring is the difference between disinflation driven by productivity gains and disinflation driven by demand destruction. Ghana is experiencing the latter whilst claiming credit for the former.
Consider the lending environment. The Bank of Ghana’s policy rate stands at 15.5 per cent. Commercial banks lend at approximately 20.45 per cent. With inflation at 3.8 per cent, this translates to real lending rates of 16.65 per cent. These are not rates that finance economic expansion. These are rates that strangle it.
Dr Samuel Addo explains the consequences with uncomfortable clarity: “Businesses do not expand, so jobs are not created. Young people struggle to find work. Traders sell less because customers have limited money to spend. Even though prices are stable, incomes do not grow fast enough. Life may feel calm at the market, but opportunities are shrinking behind the scenes.”
Visit any market in Accra, Kumasi, or Tamale and ask traders about business conditions. They’ll tell you sales have collapsed. Customers are buying less. Payment delays have become endemic. The supposed price stability hasn’t translated into improved purchasing power because incomes haven’t risen to match even these modest price increases.
The inflation figures themselves betray the demand weakness. Food inflation fell to 3.9 per cent primarily because fresh food items including garden eggs, tomatoes, okro and pawpaw declined significantly. These aren’t products where improved agricultural productivity suddenly revolutionised supply. These are perishable goods where farmers are cutting prices because nobody’s buying. When tomatoes are cheap because demand has collapsed, that’s not agricultural success. That’s economic distress.
Regional deflation in Savannah at minus 2.6 per cent tells an even grimmer story. Deflation in a developing economy context almost never signals healthy productivity gains. It signals demand so weak that prices are actually falling because sellers cannot find buyers even at reduced prices.
The 1999 Precedent That Should Terrify Us
Ghana has been here before, and the parallels should alarm anyone paying attention. In August 1999, inflation fell to 1.4 per cent, Ghana’s lowest recorded rate in modern history. Policymakers celebrated. The IMF declared victory. International observers praised Ghana’s macroeconomic management.
By December 2000, inflation had surged to 40.5 per cent. Within sixteen months, Ghana went from record low inflation to a full blown price crisis.
What happened? The 1999 low inflation wasn’t driven by productivity improvements or supply side reforms. It reflected demand collapse in the aftermath of structural adjustment programmes. When the government attempted demand stimulus heading into the 2000 elections, all that suppressed demand pressure exploded into inflation because the economy’s productive capacity hadn’t actually improved during the supposed stabilisation period.
Ghana in 2026 is replicating the 1999 mistake almost precisely. We’re celebrating low inflation driven by demand weakness whilst the structural drivers of productive capacity remain utterly unaddressed. When the inevitable pressure for growth returns, Ghana will face the same choice that confronted policymakers in 2000: maintain crushing real interest rates and accept permanent stagnation, or stimulate demand and watch inflation return with a vengeance.
The Credit Market Chokehold
The lending rates tell the real story of Ghana’s economy. At 20.45 per cent, borrowing costs make virtually any productive investment financially unviable. Consider a small manufacturer contemplating expansion. To justify a loan at 20.45 per cent, the project must generate returns exceeding that rate after accounting for all other business risks. In Ghana’s current environment, few projects clear that hurdle.
Development economist Dr George Domfe has called on the Bank of Ghana to cut rates far more aggressively, arguing that maintaining a 15.5 per cent policy rate when inflation sits at 3.8 per cent risks stifling credit, business expansion, and job creation. He’s entirely correct, but the Bank of Ghana finds itself trapped. Cut rates too aggressively and risk reigniting inflation if the low current rate truly reflects suppressed demand rather than improved fundamentals. Maintain high rates and guarantee continued economic stagnation.
This policy paralysis has real consequences. Young entrepreneurs cannot access affordable capital to start businesses. Existing businesses cannot finance expansion or working capital. Farmers cannot borrow to invest in improved inputs. The entire economy operates in a low equilibrium trap: demand is weak because incomes are stagnant, incomes are stagnant because businesses cannot access affordable credit to expand and create jobs, and businesses cannot access affordable credit because monetary policy remains focused on fighting an inflation threat that may be more phantom than real.
What Should Be Done Instead
Ghana faces a fundamental policy choice that will determine its economic trajectory for the next decade. We can continue celebrating demand driven disinflation whilst the economy stagnates, or we can pursue genuine structural transformation that makes low inflation sustainable through productivity gains rather than demand suppression.
First, the Bank of Ghana must accept that current inflation levels likely reflect demand weakness rather than supply side improvements, and adjust monetary policy accordingly. A 15.5 per cent policy rate when inflation sits at 3.8 per cent is indefensible. Real rates of this magnitude belong in an overheating economy, not a stagnant one. The central bank should cut rates to single digits, targeting a real rate of 2 to 3 per cent that actually facilitates productive investment.
The risk that lower rates reignite inflation is real but manageable. If inflation does tick upward as credit becomes more accessible, that would signal genuine demand revival, something Ghana desperately needs. The Bank of Ghana can always raise rates again if inflation threatens to exceed the 6 to 10 per cent target band. But maintaining crushingly high rates out of fear that phantom demand might materialise is economically self defeating.
Second, fiscal policy must shift from consolidation to selective stimulus, particularly in areas that can boost productive capacity. Ghana’s infrastructure deficit in electricity reliability, port efficiency, and digital connectivity directly constrains private sector productivity. Public investment in these areas would crowd in private investment rather than merely competing for scarce resources.
The government should announce a credible multi year public investment programme financed through concessional borrowing from development partners, focused exclusively on infrastructure that removes binding constraints on private sector growth. This is precisely the time for such investment when inflation is low, external balances are strong, and construction costs are favourable.
Third, export diversification must move from rhetoric to reality. Ghana’s foreign exchange earnings remain dominated by cocoa, gold, and oil, all subject to volatile international prices. Ghana should establish Special Economic Zones with reliable electricity from dedicated renewable energy sources, streamlined regulatory frameworks, and targeted tax incentives for manufacturing exports. If Ghana cannot provide 24/7 electricity at competitive costs, manufacturing for export simply will not happen.
Fourth, credit market reform must address the structural factors keeping lending rates unconscionably high even as policy rates fall. The spread between the Bank of Ghana’s 15.5 per cent rate and commercial lending rates of 20.45 per cent reflects both genuine credit risk and oligopolistic banking sector behaviour. The government should work with development finance institutions to establish a wholesale credit facility that provides long term, lower cost funding to commercial banks specifically for lending to priority sectors including agriculture, manufacturing, and SMEs.
Finally, Ghana must avoid the political economy trap that destroyed the 1999 stabilisation gains. As the 2028 elections approach, pressure will mount for fiscal expansion, wage increases, and subsidy restoration. These pressures sank Ghana after the 2000, 2008, and 2012 elections. The pattern is depressingly predictable.
The only defence is institutional. Ghana needs constitutional fiscal rules that survive electoral cycles, an independent Fiscal Council with binding authority over budget compliance, and transparent reporting requirements that make fiscal slippage immediately visible to the public. These institutional constraints must be in place before electoral pressures intensify, not afterwards when damage has already occurred.
The Uncomfortable Conclusion
Ghana’s 3.8 per cent inflation is not the triumph government claims. It’s evidence of an economy running well below its potential, where demand is so weak that prices cannot rise, where credit costs are so high that businesses cannot invest, where young people cannot find jobs because firms are not expanding.
The low inflation we’re experiencing now is not the foundation for sustainable growth. It’s a warning sign of stagnation that, left unaddressed, will either condemn Ghana to permanent low level equilibrium or, more likely, explode into renewed inflation crisis when political reality forces some form of demand stimulus.
The 1999 precedent offers a sobering lesson. Low inflation driven by demand suppression is temporary. Without genuine productivity improvements, structural transformation, and export diversification, Ghana’s current price stability will prove as illusory as it was 27 years ago.
The question is whether Ghana’s policymakers have learned anything from that experience, or whether we’re condemned to repeat it. The next two years will provide the answer.
Dominic Senayah is an international relations researcher and policy analyst specialising in trade policy, economic development, and institutional reform. He holds an MA in International Relations from England-United Kingdom and publishes regularly on Ghana’s political economy.
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