The Governor of the Bank of Ghana (BoG), Dr Johnson Pandit Asiama, has asserted that the early signs of macroeconomic stabilisation are largely the results of recent policy actions by the central bank as well as improvement in external and domestic fundamentals.

He said the decline in inflation to 21.2 per cent last month had been shaped by a combination of monetary tightening, relative exchange rate stability, and easing of non-food inflation.

"In March this year, the committee responded decisively to the inflation by raising the policy rate by 100 basis points to 28 per cent.

"Preliminary evidence suggests that this action has contributed to dampening inflation momentum and, importantly, the cedi has appreciated by nearly 19 per cent between April and May, helping to ease imported inflation pressures and restoring public confidence," Dr Asiama said.

Again, the Governor stressed that the appreciation of the cedi reflected a combination of factors that included prudent monetary policy, improved market sentiments and external sector gains.

MPC meeting

Dr Asiama stated this at the opening of the 124th Monetary Policy Committee (MPC) meeting in Accra yesterday.

Apart from the mandated members of the MPC attending the meeting, four advisors appointed by the central bank, as well as the President of the Ghana Union of Traders’ Associations (GUTA), Joseph Obeng, participated in the meeting.

The three advisors are the Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye; the Dean of the University of Cape Coast Business School, Professor John Gatsi; a former International Monetary Fund (IMF) Resident Representative, Dr Francis Kumah; and a director at the central bank, Franklin Belnye.

The MPC meeting is expected to, among others, assess monetary policy outcomes and impact on the markets over the previous quarter and assess the outlook.

The members would ascertain whether the observed rate of change in the exchange rate appreciation is sustainable; how durable the return of market confidence could be, and the implications of those dynamics on inflation forecast over the medium term.

Dr Asiama also said there were encouraging signs of macroeconomic progress that needed to be sustained going forward.

For instance, the country had reached a staff-level agreement with the International Monetary Fund (IMF) on the fourth review of the Extended Credit Facility (ECF) programme, he said.

The Governor added that although some prior actions remained outstanding under the ECF key performance indicators, the trajectory was positive.

Additionally, he said, the recent S&P Global Ratings upgrade of Ghana’s sovereign rating from selective default to CCC+ further affirmed the progress that had been made so far in managing the economy.

“External reserves have strengthened, the trade balance has improved, and consumer and business confidence indices are rising steadily. However, significant challenges persist,” he added.

Dr Asiama said although there had been stabilisation in macroeconomic conditions, the path ahead remained complex and fraught with risks, both global and domestic. 

He said it was in that regard that the MPC meeting needed to make far-reaching decisions to consolidate the gains made thus far.

The Governor said the current format of the MPC, which included both internal advisors and external MPC members, had significantly sharpened the focus of the bank on key policy issues.
 

More work

Dr Asiama said in spite of the gains that had been made in terms of the macroeconomic environment, more work needed to be done to improve upon the situation.

He said while the inflation outlook was improving, the situation remained vulnerable to second-round effects, including food supply constraints, especially from northern Ghana and the Sahel, as well as external price shocks, particularly given the volatile global commodity markets.

Again, Dr Asiama said geopolitical tensions and evolving global trade dynamics, including the recent United States-led tariff disputes, had heightened market uncertainty and could affect commodity prices, exchange rates and financial flows in emerging markets such as Ghana’s.

Monetary policy review

Dr Asiama said it was in that regard the central bank had commenced a comprehensive review of its monetary policy implementation framework “to transition from reliance on the unremunerated cash reserve ratio to a more active open market operation regime, including the use of longer-tenor BoG instruments.”

He said the monetary policy review was intended to enhance policy transmission, improve liquidity management, and allow greater room for credit expansion to the private sector.

“As we approach our deliberations, we must carefully assess whether the current monetary policy stance remains adequate to drive disinflation without undermining the fragile growth momentum,” Dr Asiama charged the team.

He stressed that the credibility of the MPC depended on the committee’s ability to respond decisively and proportionately to evolving economic realities. 

Context

The Ghana cedi extended its upward momentum against major trading currencies into the third week of May, showing significant appreciation since March this year.

Data from the Bank of Ghana showed that the cedi strengthened from GH¢15.53 to GH¢13.09 per dollar on the buying rate between March 12 and May 12, 2025, while the selling rate improved from GH¢15.55 to GH¢13.10.

Similar gains were recorded against the pound sterling, with the buying price rising from GH¢20.09 to GH¢17.42 and the euro from GH¢16.96 to GH¢14.74 over the same period.