Governor of the Bank of Ghana, Dr. Johnson Asiama, has warned that escalating tensions in the Middle East could threaten Ghana’s disinflation progress, despite recent improvements in the country’s macroeconomic indicators.
Speaking at the opening of the 129th Monetary Policy Committee (MPC) meeting, the Governor said the evolving geopolitical environment could influence the central bank’s policy decisions in the coming days.
“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.
“This conflict is disrupting key energy and shipping corridors. It is increasing volatility in global oil markets and introducing new uncertainty into the trajectory of global inflation,” he said.
Risk of imported inflation
The Governor explained that rising oil prices triggered by geopolitical tensions could pass through to Ghana’s domestic economy via higher import costs.
“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,” he noted.
However, he added that the uncertainty could also offer some upside for Ghana through stronger gold prices.
“Geopolitical uncertainty tends to support gold prices. You know the role of gold in our equation. This could benefit our trade balance,” he added.
Despite this potential gain, he cautioned that the broader risk outlook remains inflationary.
“Taken as a whole, the net balance of risks from this external shock could be inflation, and hence this has to be considered in our deliberations.”
Inflation below the target band raises policy questions
The Governor also highlighted that Ghana’s inflation has now fallen below the central bank’s target band, presenting a fresh policy challenge for the committee.
“At 3.3 percent, inflation is not just simply within the band; it is below the lower band.”
He said the MPC would need to carefully evaluate how the current policy stance aligns with evolving economic conditions.
“For an economy such as ours, where activity is trending and credit is beginning to recover, the committee must assess how the current policy stance interacts with the evolving macroeconomic conditions.”
Reserve accumulation programme under review
Another key issue before the committee is the government’s newly announced Ghana Accelerated National Reserve Accumulation Programme (GANRAP), which aims to significantly strengthen the country’s external buffers.
“It seeks to raise international reserves to 50 months of import cover by 2028, compared to current levels of around 5.8 months of import cover,” the Governor said.
While he described stronger reserves as vital for macroeconomic resilience, he noted that such programmes also raise important policy considerations.
“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.”
Banking sector sound but credit growth subdued
The Governor also pointed to the role of the banking sector in supporting effective monetary policy transmission.
According to him, Ghana’s banking system remains stable and well-capitalised.
“The banking sector remains sound, profitable and well capitalised, with asset quality improving meaningfully over the past year.”
However, he acknowledged that credit growth remains relatively weak — an issue the committee will examine closely.
“We need to evaluate whether the constraint is from the supply side, whether it is on the side of banks in terms of risk appetite, capital buffers or non-performing loans, or whether it is from the demand side in terms of weak borrower demand.”
Balancing domestic gains with global uncertainty
Dr. Asiama emphasised that although Ghana’s macroeconomic indicators have improved considerably, policymakers must remain cautious.
“The question before the committee is not whether conditions have improved. They have indeed, significantly and across the board.”
He stressed that the central bank must weigh domestic progress against emerging global risks.
“We must make our decision at the intersection of domestic success and growing external uncertainty.”
The 129th MPC meeting will review inflation trends, macroeconomic conditions and global developments before the Bank of Ghana announces its next Monetary Policy Rate decision on March 18, 2026.
