BoG counts cost of inflation fight despite gains

The Governor of the Bank of Ghana (BoG), Dr Johnson Pandit Asiama, has stated that the central bank’s aggressive measures to curb inflation in 2025 came at a considerable financial cost, even though they contributed significantly to improved macroeconomic stability and restored confidence in the economy.

He explained that to achieve the outcome, the central bank had to commit substantial financial and operational resources to mop up excess liquidity from the system, a move that was necessary to stabilise prices and restore economic balance.

With inflation declining sharply from 23.8 per cent at the end of 2024 to 5.4 per cent by December 2025, the Governor described the outcome as a major policy success, but cautioned that it was “good but expensive” due to the heavy financial implications involved.

Speaking at the Kwahu Business Forum in the Eastern Region last Sunday, Dr Asiama stated that the high cost was largely driven by intensive open market operations, particularly the issuance of BoG bills used to absorb excess liquidity and tighten monetary conditions across the financial system.

Policy trade-offs

The Governor underscored the complex trade-offs that central banks faced in managing economies.

He explained that the policy decisions often involved difficult choices between controlling inflation and supporting economic growth.

Reflecting on the country’s economic performance in 2025, Dr Asiama described it as broadly positive but achieved at a significant cost to the central bank.

The cost of monetary stability has risen from GH¢8.37 billion (2023) to GH¢8.6 billion (2024) and significantly higher to GH¢17 billion in 2025.
 

Relative stability 

Touching on key macroeconomic indicators, Dr Asiama stated that the local currency had attained relative stability in recent months, reflecting improved market confidence, stronger policy coordination, and the impact of sustained interventions by the BoG to maintain exchange rate stability.

“The cedi is stable and under control,” he said.

Dr Asiama explained that central banking was not a straightforward process, emphasising that “the work we do is always about trade-offs; trying to strike the right balance” between competing policy objectives.”

He said achieving low and stable inflation — while critical for economic growth — often required tightening liquidity conditions, which could have implications for credit availability and overall economic activity.

Positive impact

The Governor stated that in spite of the challenges, the strong macroeconomic performance recorded in 2025 had a positive impact on the broader economy, helping to restore confidence among businesses and investors.

He reiterated that the sharp decline in inflation to 5.4 per cent by the end of 2025 was a major milestone.

Dr Asiama added that “last year was good but expensive for the central bank,” given the scale of resources required to achieve that outcome.

Outlook for 2026

Dr Asiama expressed optimism that the cost of maintaining low inflation would reduce significantly this year, given the current stable macroeconomic environment.

He explained that the central bank’s monetary operations in 2025 were largely focused on draining excess liquidity from the system, a process that required sustained interventions through open market operations.

However, he said that with inflation now at a much lower level compared to previous periods, the same level of financial commitment would not be required going forward.

“f you look at where inflation was at the end of December 2024 and where it is now, it wouldn’t involve the same level of resources to keep it low and stable,” he said.

Balancing inflation

The Governor stated that central banks globally, including institutions such as the Federal Reserve and the European Central Bank, faced similar challenges in balancing inflation control with economic growth, often at considerable cost.

While the financial burden of such interventions may be high, central banks could not afford to allow inflation to erode the purchasing power of citizens and destabilise the economy, he stressed.

Dr Asiama emphasised the importance of collaboration within the financial sector, as a stable and resilient banking system was essential for sustaining economic growth.

“When banks are strong, they can give more credit,” he said, adding that the central bank would continue to implement policies aimed at strengthening financial institutions and supporting private sector development.