Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, has shed fresh light on the complex and often difficult decisions that underpin monetary policy, stressing that central banking is fundamentally about navigating trade-offs—particularly between controlling inflation and sustaining economic growth.
Speaking at the Governor’s Roundtable session during the Kwahu Business Forum, Dr Asiama offered a candid assessment of Ghana’s recent macroeconomic performance and the policy sacrifices required to stabilise the economy.
Balancing growth and inflation
At the heart of the Governor’s remarks was the delicate balancing act central banks must perform.
He explained that every policy decision involves weighing competing objectives, often with no perfect outcome.
“The work we do is always about trade-offs… trying to strike the right balance,” he noted, underscoring the tension between tightening monetary policy to control inflation and maintaining conditions that support business growth and job creation.
According to him, prioritising inflation control—while necessary for long-term stability—can sometimes constrain credit expansion and slow economic activity.
Conversely, policies aimed at boosting growth can risk fuelling inflationary pressures if not carefully managed.
Costly fight against inflation
Dr Asiama revealed that Ghana’s strong macroeconomic performance in 2025 came at a significant financial cost to the central bank.
While the country recorded notable gains, including a stable exchange rate and declining inflation, these achievements required aggressive monetary interventions.
“It took us a lot of money to mop up excess liquidity and bring inflation down to 5.4% by December 2025,” he disclosed.
This process, commonly referred to as liquidity sterilisation, involves the central bank absorbing excess money from the financial system to reduce inflationary pressures.
However, such operations often come with high interest costs and balance sheet implications for the central bank.
Despite these costs, the results have been striking.
Inflation has since declined further to 3.2%, signalling improved price stability and strengthening confidence in the economy.
Exchange rate stability and macroeconomic gains
Dr Asiama highlighted the relative stability of the Ghana cedi as another key achievement of the Bank’s policy measures.
“The cedi is stable and under control,” he stated, pointing to a broader improvement in macroeconomic fundamentals.
This stability, he explained, is critical not only for inflation control but also for investor confidence, import costs, and overall economic predictability.
A stable currency reduces uncertainty for businesses, particularly those reliant on imports or foreign-denominated obligations.
A different outlook for 2026
Looking ahead, Dr Asiama expressed optimism that the cost of maintaining macroeconomic stability would ease in 2026.
“If 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 going forward,” he said.
This suggests that the heavy lifting done in 2025 has created a foundation for more sustainable and less resource-intensive monetary management in the near term.
The implication is that with inflation now firmly under control, the central bank may have greater flexibility to support economic growth without triggering price instability.
Implications for businesses and credit
Dr Asiama emphasised that the ultimate goal of the central bank’s policies is to create a stable and enabling environment for businesses.
He noted that strong and well-capitalised banks are essential for economic expansion, as they are better positioned to extend credit to businesses and households.
“When banks are strong, they can give more credit,” he explained.
This highlights another critical trade-off: while tight monetary policy can initially restrict lending, it ultimately strengthens financial institutions and creates the conditions for more sustainable credit growth.
Importance of collaboration
The Governor also stressed the need for closer collaboration between policymakers, financial institutions, and the business community.
He assured participants that the central bank remains committed to strengthening financial markets and supporting private sector development.
The roundtable session, which concluded the Kwahu Business Forum, brought together key stakeholders, including Julius Debrah, Rita Akosua Adjei Awatey, Seth Terkper, and Marietta Agyeiwaa Brew, alongside business leaders, investors, and development partners.
A delicate policy balancing act
Analysts say the Governor’s remarks provide important insight into the realities of monetary policymaking in a developing economy.
The need to balance inflation control with economic growth is particularly acute in Ghana, where high inflation can erode purchasing power and destabilise the economy, while overly restrictive policies can limit business expansion and employment.
Dr Asiama’s explanation reinforces the idea that central banking is not about achieving perfect outcomes, but about making informed choices in a constrained environment—where every gain in one area may come at a cost in another.
The challenge for BoG will be to sustain price stability while gradually creating room for growth to underpin economic recovery.
Dr Asiama’s message is clear: achieving this balance is not only crucial, but also inherently difficult—requiring careful judgment, significant resources, and a willingness to make tough decisions in the national interest.
In the months ahead, the effectiveness of this balancing act will play a decisive role in shaping Ghana’s economic trajectory, influencing everything from inflation and exchange rates to business confidence and job creation
