Bank of Ghana Pulls GH¢65 Billion From Circulation to Contain Inflation—At a Heavy Cost

The Bank of Ghana (BoG) has withdrawn an unprecedented GH¢65 billion from the economy since the start of 2025 in a sweeping liquidity mop-up operation designed to rein in inflation and restore price stability.

Governor Dr. Johnson Asiama, speaking at the Governor Talks Programme during the IMF/World Bank Annual Meetings in Washington, D.C., said the scale of the intervention underscores the central bank’s resolve to defend the cedi and maintain macroeconomic stability — even at great financial cost.

“The cost to the central bank’s balance sheet has been immense,” Dr. Asiama admitted. “Almost total money supply is around GH¢85 billion currently, and out of that, the sterilisation we have done this year alone accounts for about GH¢65 billion. But there’s a price to stabilisation. There’s a cost to it.”

A Costly Fight for Stability

The liquidity mop-up — achieved through open market operations such as short-term bill issuances and repurchase agreements — has been one of the most aggressive monetary tightening efforts in Ghana’s recent history.

By issuing high-yield short-term securities, the BoG has effectively absorbed excess liquidity that could have fuelled inflationary pressures. But the policy also carries a heavy burden: soaring interest expenses that threaten to weaken the Bank’s own financial position.

“We are in discussions with the fiscal authorities for them to assist us, probably to pick up part of that cost,” Dr. Asiama revealed. “As they always say, stability is a public good. When there’s macroeconomic stability, someone needs to pay for it.”

Inflation Pressures and Fiscal Coordination

The central bank’s actions come amid a delicate recovery effort following years of fiscal slippage, currency volatility, and the lingering effects of the 2022–2023 domestic debt restructuring. Inflation has eased from last year’s peaks but remains a policy challenge, requiring consistent liquidity restraint to sustain downward momentum.

Economists say the sterilisation program has helped anchor inflation expectations and stabilise the Ghana cedi, but warn that the BoG’s tightening campaign could become unsustainable without greater fiscal discipline and government support.

“Monetary policy alone cannot carry the full weight of macroeconomic stability,” said one Accra-based analyst. “If fiscal conditions remain loose, the cost of sterilisation will eventually weigh on the central bank’s reserves and profitability.”

Rebuilding Confidence and the BoG’s Balance Sheet

Dr. Asiama acknowledged that while the central bank’s tightening measures have stabilised markets, they have also deepened financial strain on the institution’s balance sheet — still recovering from the debt exchange programme that eroded its capital base.

“We came in to meet a bank that was hardly solvent, policy-wise,” he noted. “Rebuilding the balance sheet is being tackled alongside the stability we are achieving.”

He added that the BoG is working to strengthen its financial resilience through improved asset management and better coordination with fiscal authorities to share the burden of stabilisation costs.

Open Market Operations Drive Results

The BoG’s liquidity mop-up operations — through treasury bills, repurchase agreements, and term deposits — have been central to its inflation-control strategy this year. These actions have tightened monetary conditions, moderated speculative activity in the forex market, and supported the recent appreciation of the cedi.

With total sterilisation now exceeding GH¢65 billion, market watchers say the central bank’s intervention has restored a measure of confidence among investors and businesses, signaling policy credibility after years of fiscal pressure.

The Price of Stability

Despite the financial toll, Dr. Asiama insists the central bank will not relent in its pursuit of long-term price stability — a foundation, he says, upon which sustainable economic growth must be built.

“We know the cost is heavy, but stability remains the foundation of growth,” he said. “We must all share in that responsibility.”

As Ghana navigates a challenging global environment marked by tightening credit conditions and fiscal constraints, the Bank of Ghana’s costly but determined effort to stabilise the economy underscores a broader message: monetary stability may come at a price — but instability costs far more.

Source: Accra Business News