Economist and lecturer at the University of Ghana, Dr. Gloria Afful-Mensah, says Ghana’s recent macroeconomic stabilisation marked by easing inflation, improving growth and stronger policy transmission has come with necessary but justified costs on the balance sheet of the Bank of Ghana.
Her comments come as Ghana records a notable turnaround, with inflation easing to about 3.2 percent, monetary policy gradually normalising from crisis levels, and GDP growth for 2025 rising to around 6.0 percent compared to 5.8 percent in 2024.
Speaking on Channel One TV’s Quarterly Economic Outlook on Monday, April 27, Dr. Afful-Mensah explained that the Bank of Ghana’s inflation-targeting framework relies heavily on managing expectations within a defined target band of 8 percent plus or minus 2 percent.
“Currently the monetary policy that the Bank of Ghana is implementing is the inflation targeting framework and the framework thrives more on the ability to manage the expectations of the public,” she said.
She noted that while policy rate adjustments are meant to transmit into commercial lending rates and ultimately the real sector, structural rigidities in the financial system have often weakened this mechanism.
“What we have seen historically shows that there’s that rigidity in terms of the lending rates responding to the policy rates,” she explained.
Correction losses
Dr. Afful-Mensah pointed to excess liquidity in the banking system and profit-maximising behaviour by banks as key factors that distort transmission, as banks often respond to government securities rather than policy signals.
This, she said, necessitated open market operations to mop up liquidity actions that appear as costs on the financial statements of the Central Bank.
“The losses that we are talking about are accounting losses and necessary correction losses,” she stressed.
She argued that these interventions were crucial to curb inflation, which previously exceeded 50 percent in 2022, and to prevent deeper erosion of incomes, savings and living standards.
While acknowledging concerns over the Bank of Ghana’s balance sheet, she maintained that the interventions were corrective rather than misallocated, adding that as liquidity normalises, such costs are expected to ease going into 2026.
