The Governor of the Bank of Ghana, Dr Johnson Asiama, has warned that rising tensions in the Middle East may jeopardize the country’s recent gains in controlling inflation, despite encouraging improvements in Ghana’s macroeconomic performance.
Addressing the opening of the 129th Monetary Policy Committee (MPC) meeting, Dr Asiama emphasized that developments in the global geopolitical landscape since the committee’s last session could significantly influence upcoming monetary policy decisions.
“The escalation of conflict in the Middle East has begun to disrupt key global energy and shipping routes, creating volatility in international oil markets,” he said, noting that such uncertainties could spill over into domestic inflation.
Dr Asiama explained that increases in global oil prices could feed into higher costs for Ghana through imports. “For Ghana, the transmission channels are clear. Sustained oil price increases could raise the risk of imported inflation and tighten global financial conditions,” he warned.
However, the Governor also acknowledged a potential upside for Ghana. Rising geopolitical uncertainty tends to support gold prices, which could boost export earnings. “Given the importance of gold in our export earnings, this could improve our trade balance,” he said.
Despite this positive effect, Dr Asiama stressed that the overall risks are skewed towards inflationary pressures, which the MPC must carefully consider in its policy deliberations.
Highlighting the domestic inflation landscape, the Governor noted that Ghana’s inflation rate has fallen below the Bank of Ghana’s target band. “At 3.3 per cent, inflation is not only within the target band but has fallen below its lower limit,” he remarked, underlining the new policy challenges this presents.
Dr Asiama also said the MPC would review the government’s Ghana Accelerated National Reserve Accumulation Programme (GANRAP), which aims to build the country’s foreign reserves to cover 50 months of imports by 2028, up from the current 5.8 months. While he described stronger reserves as essential for economic resilience, he cautioned that such programs could impact liquidity and the central bank’s balance sheet, influencing monetary policy.
Touching on the banking sector, Dr Asiama noted that Ghana’s banks remain stable, profitable, and well-capitalized, with notable improvements in asset quality. Nevertheless, he pointed out that credit growth remains sluggish, saying the MPC will explore whether the slow lending pace is due to banks’ risk appetite and capital buffers or weak borrower demand.
Dr Asiama acknowledged the positive strides in Ghana’s economic conditions while urging caution amid global uncertainties. “The question before the committee is not whether conditions have improved. They have indeed improved significantly across the board,” he said.
