Governor of the Bank of Ghana, Johnson Asiama, has cautioned that escalating tensions in the Middle East could disrupt Ghana’s improving macroeconomic outlook and threaten progress in reducing inflation.
Speaking at the opening of the Monetary Policy Committee’s 129th meeting, Dr Asiama said global developments since the last policy meeting have introduced fresh uncertainties that could influence the central bank’s policy direction.
“The external environment has changed since our last meeting.
"A significant external development has entered the picture, and that has to do with the escalation of the conflict in the Middle East.” - Governor of the Bank of Ghana
According to him, the conflict is already affecting key global energy and shipping corridors, contributing to volatility in international oil markets.
Rising oil prices raise the risk of imported inflation
The Governor explained that sustained increases in global oil prices could translate into higher domestic costs for Ghana, potentially reversing some of the progress made in lowering inflation.
“For Ghana, the transmission channels are clear.
"Sustained oil price increases could raise the risk of imported inflation and could also tighten global financial conditions.” - Governor of the Bank of Ghana
However, Dr Asiama acknowledged that geopolitical uncertainty can sometimes create economic opportunities for the country.
Despite the potential gains from stronger gold prices, he emphasised that the overall balance of risks still leans toward higher inflationary pressures.
The Governor also revealed that Ghana’s inflation rate has recently dropped below the central bank’s target band, presenting a new challenge for policymakers. “At 3.3 per cent, inflation is not just simply within the band; it is below the lower band,” he said.
This development, he explained, means the committee must carefully evaluate how the current policy stance interacts with broader macroeconomic trends.
Reserve accumulation programme under review
Dr Asiama said the committee is also reviewing the government’s Ghana Accelerated National Reserve Accumulation Programme, which aims to significantly strengthen the country’s foreign reserves.
The initiative targets an increase in international reserves to 50 months of import cover by 2028, compared with the current level of about 5.8 months.
“Initiatives of this scale raise questions regarding liquidity conditions, the impact on the central bank’s balance sheet, and the interaction between reserve accumulation and monetary policy operations.” - Governor of the Bank of Ghana
While reviewing domestic financial conditions, the Governor noted that Ghana’s banking sector remains stable and well-capitalised.
“The banking sector remains sound, profitable and well capitalised, with asset quality improving meaningfully over the past year.” - Governor of the Bank of Ghana
However, credit growth remains relatively subdued, prompting the committee to examine whether the constraints are coming from banks or borrowers.
Balancing domestic gains with global uncertainty
Dr Asiama emphasised that Ghana’s economic indicators have improved significantly, but warned against complacency.
“The question before the committee is not whether conditions have improved. They have indeed, significantly and across the board.”
He stressed that policymakers must weigh the country’s domestic progress against emerging global risks before making decisions.
The Bank of Ghana is expected to announce its next Monetary Policy Rate decision on March 18, following the conclusion of the MPC meeting.
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