Minority Criticises BoG’s Sterilisation Policy, Calls For Growth-Driven Alternatives
The Minority in Parliament has raised sharp concerns over the Bank of Ghana’s sterilisation policy, arguing that the approach is undermining growth prospects and starving the private sector of much-needed capital.
Ranking Member on the Economy and Development Committee and MP for Ofoase-Ayirebi, Kojo Oppong Nkrumah, disclosed in a social media post that the Central Bank has sterilised more than GH¢60 billion since January, under the assumption that the economy was awash with excess liquidity.
“From January till now, the central bank has admitted to us that they have mopped up over 60 billion Ghana cedis from the Ghanaian economy. When that money is packed at the Bank of Ghana, it is not available for demand, and so prices won’t rise that quickly. But this is one of the artificial ways of controlling inflation,” he stated.
Sterilisation, a tool used by central banks to absorb excess liquidity and dampen demand-driven inflation, is intended to slow consumer spending and ease pressure on prices. However, the Minority contends that the scale of Ghana’s sterilisation effort is counterproductive, particularly when compared to the Ghana Stock Exchange’s current market capitalisation of a little over GH¢130 billion.
“If you sterilise 62 billion and compare it to our total stock market capitalisation, you will see the scale of the problem. We cannot just continue packing liquidity at the central bank while businesses starve of capital,” Oppong Nkrumah argued.
He proposed that part of the sterilised funds should be channelled into productive investment avenues such as the Venture Capital Trust Fund, which was established under former President John Kufuor to mobilise equity financing for startups and small businesses.
“Young people with great business ideas could have access to this equity capital. If these funds go into the Venture Capital Trust Fund, they can be deployed to help entrepreneurs expand their operations, create jobs, and grow the economy. That is far more beneficial than simply sterilising liquidity,” he noted.
According to him, the sterilised funds could also be channelled into the stock market to provide zero-coupon equity financing for existing businesses to boost production and employment creation.
The Ofoase-Ayirebi MP warned that the current reliance on sterilisation provides only a temporary fix to inflationary pressures.
“Eventually, when you release that money back into the economy, inflation will pick up again. So this old economic orthodoxy of just sterilising money and packing it at the Bank of Ghana is not sustainable. What we need is a broader and better strategy that supports growth while managing inflation,” he said.
The Minority has thus urged government and policymakers to adopt innovative policy measures that balance inflation control with strategies that stimulate long-term growth and job creation.
