Middle East Tensions Pose Risk to Ghana’s Disinflation Gains, Says BoG Governor
Governor of the Bank of Ghana, Johnson Asiama, has cautioned that rising geopolitical tensions in the Middle East could threaten Ghana’s recent progress in reducing inflation, despite signs of improving macroeconomic performance.
Addressing participants at the opening of the 129th meeting of the Monetary Policy Committee (MPC), Dr Asiama indicated that developments in the global environment could shape the central bank’s policy decisions in the days ahead.
“The external environment has changed since our last meeting. A major global development has emerged, and that relates to the escalation of conflict in the Middle East.
“This conflict is affecting critical energy and shipping routes. It is also increasing volatility in global oil markets and creating fresh uncertainty around the outlook for global inflation,” he stated.
Risk of imported inflation
The Governor explained that higher global oil prices arising from geopolitical tensions could translate into domestic inflation through increased import costs.
“For Ghana, the channels of transmission are straightforward. Prolonged increases in oil prices could heighten the risk of imported inflation and may also tighten global financial conditions,” he said.
At the same time, he noted that geopolitical instability could also generate some benefits for Ghana through higher gold prices.
“Periods of geopolitical uncertainty often push gold prices upward. You are aware of the role gold plays in our economic framework. This could support our trade balance,” he added.
Nevertheless, he warned that the overall risk balance still tilts toward inflationary pressures.
“Overall, the net effect of this external shock could be inflationary, and this is something the committee must take into account in its deliberations.”
Inflation below target band raises policy questions
Dr Asiama further pointed out that Ghana’s inflation has now declined below the central bank’s target range, presenting a new policy challenge for the MPC.
“At 3.3 percent, inflation is not only within the band; it is actually below the lower bound,” he said.
According to him, the committee will need to carefully evaluate how the current monetary policy stance interacts with evolving economic conditions.
“For an economy like ours, where economic activity is improving and credit conditions are gradually recovering, the committee must assess how the existing policy stance aligns with the changing macroeconomic environment.”
Reserve accumulation programme under review
The Governor also noted that the committee will consider the government’s newly introduced Ghana Accelerated National Reserve Accumulation Programme (GANRAP), which seeks to strengthen the country’s external buffers.
“It aims to increase international reserves to about 50 months of import cover by 2028, compared to the current level of approximately 5.8 months,” he explained.
While emphasising that stronger reserve buffers are vital for economic stability, he noted that programmes of this scale also raise important policy questions.
“Initiatives of this magnitude raise issues concerning liquidity conditions, the impact on the central bank’s balance sheet, and how reserve accumulation interacts with monetary policy operations,” he said.
Banking sector sound but credit growth modest
Dr Asiama also underscored the importance of the banking sector in supporting effective transmission of monetary policy.
He indicated that Ghana’s banking sector remains stable and adequately capitalised.
“The banking sector continues to be sound, profitable and well capitalised, with asset quality improving significantly over the past year,” he noted.
However, he acknowledged that credit expansion remains relatively modest, an issue the committee intends to examine more closely.
“We need to determine whether the constraint lies on the supply side, perhaps from banks’ risk appetite, capital requirements or non-performing loans, or whether it stems from the demand side due to weak borrower appetite.”
Balancing domestic progress with global risks
Dr Asiama emphasised that although Ghana’s macroeconomic indicators have improved considerably, policymakers must remain cautious.
“The issue before the committee is not whether conditions have improved. They certainly have, and across several indicators,” he stated.
He stressed that policymakers must carefully balance the progress made domestically with rising uncertainties in the global economy.
“Our decisions must be taken at the intersection of domestic improvement and increasing external uncertainty.”
The 129th MPC meeting will evaluate inflation dynamics, macroeconomic developments and global risks before the Bank of Ghana announces its next Monetary Policy Rate decision on Wednesday, March 18, 2026.
