Accra: Bank of Ghana (BoG) Governor Dr. Johnson Asiama has asserted that the simultaneous improvement in all significant economic indicators over the past 13 months is not coincidental, but rather a testament to the well-coordinated monetary and fiscal policies implemented by the central bank. This interconnectedness has been key to the recent economic progress, he emphasized at a Fireside Chat hosted by the Ghana Export-Import Bank (Ghana EXIM).
According to Ghana Web, Dr. Asiama responded to moderator Bernard Avle's query on whether the central bank's objective is to reduce all rates, by explaining the interconnected nature of economic indicators. The Governor highlighted positive developments across several metrics, including headline inflation, the Monetary Policy Rate (MPR), the Ghana Reference Rate (GRR), average bank lending rates, the exchange rate, and gross international reserves. Over a period from February 2025 to 2026, headline inflation dropped from 23.1 percent to 3.3 percent, a 19.8 percentage point reduction. The MPR saw a decrease from 27 percent to 14 percent, while the GRR fell from 29 percent to 14 percent. Furthermore, average bank lending rates declined from 30.12 percent to 19.7 percent, and the cedi strengthened against the dollar, with the selling rate moving from GHS15.3 to GHS10.95. Gross international reserves also rose significantly from US$8.9 billion to US$13.8 billion.
Prior to the 2022 fiscal and debt crisis, Ghana experienced the opposite economic trajectory, with rising inflation, deteriorating exchange rates, falling reserves, and high lending rates. The crisis culminated with gross international reserves reaching critical lows, the cedi losing significant value, and inflation peaking at 54.1 percent in December 2022. The BoG's strategic interventions, particularly the absorption of excess liquidity, played a crucial role in reversing these trends. As liquidity tightened and inflation subsided, the Monetary Policy Committee was able to reduce the policy rate, leading to improved monetary conditions and a more stable exchange rate.
Dr. Asiama warned of the significant risks associated with alternative policy sequences, noting that premature rate cuts could have reignited inflationary pressures, while direct exchange rate interventions could have depleted reserves without addressing the underlying monetary conditions. He identified developments in the Middle East as a primary external risk, with oil price volatility and imported inflation as direct transmission channels. The Governor emphasized the importance of entering such an environment with a stable economic foundation to withstand external shocks.
The significant decline in lending rates, viewed as the most consequential gain during Dr. Asiama's tenure, has been transformative for Ghanaian businesses. The Governor noted that previous high rates made borrowing unfeasible for many, contributing to a high incidence of non-performing loans. The reduction in lending rates by 10.4 percentage points over thirteen months marks a notable improvement, though real borrowing costs remain high relative to the inflation rate.
Dr. Asiama also highlighted the need for a shift in how businesses and households perceive the cedi, aiming to foster a mindset not reliant on currency depreciation. He expressed confidence that sustained stability would naturally lead businesses to operate more within the cedi zone, without the need for compulsion. While he did not set specific targets for further rate reductions, Dr. Asiama indicated expectations for continued improvement as monetary conditions remain stable and inflation is maintained at current levels.