Governor of the Bank of Ghana, Dr. Johnson Asiama, has warned that escalating tensions in the Middle East could threaten Ghana’s disinflation progress, even as the country records improving macroeconomic indicators.
Speaking at the opening of the 129th Monetary Policy Committee (MPC) meeting, the Governor said the evolving geopolitical environment could influence the central bank’s policy deliberations in the coming days.
“The external environment has changed since our last meeting. A significant external development has entered the picture, and that has to do with the escalation of the conflict in the Middle East.
“This conflict is disrupting key energy and shipping corridors. It is increasing volatility in global oil markets and introducing new uncertainty into the trajectory of global inflation,” he said.
Risk of imported inflation
The Governor explained that rising oil prices resulting from geopolitical tensions could feed into domestic inflation through imported costs.
“For Ghana, the transmission channels are clear. Sustained oil price increases could raise the risk of imported inflation and could also tighten global financial conditions,” he noted.
However, he said geopolitical uncertainty could also have some positive implications for Ghana through rising gold prices.
“Geopolitical uncertainty tends to support gold prices. You know the role of gold in our equation. This could benefit our trade balance,” he added.
Despite this potential benefit, he cautioned that the overall balance of risks still points to inflationary pressures.
“Taken as a whole, the net balance of risks from this external shock could be inflation, and hence this has to be considered in our deliberations.”
Inflation below the target band raises policy questions
The Governor also highlighted that Ghana’s inflation has now fallen below the central bank’s target band, creating a new policy dilemma for the committee.
“At 3.3 percent, inflation is not just simply within the band; it is below the lower band.”
He said the MPC must carefully assess how the current policy stance interacts with the evolving macroeconomic environment.
“For an economy such as ours, where activity is trending and credit is beginning to recover, the committee must assess how the current policy stance interacts with the evolving macroeconomic conditions.”
Reserve accumulation programme under review
Another key issue before the committee is the government’s newly announced Ghana Accelerated National Reserve Accumulation Programme (GANRAP). The initiative aims to significantly boost Ghana’s external buffers in the coming years.
“It seeks to raise international reserves to 50 months of import cover by 2028, compared to current levels of around 5.8 months of import cover,” the Governor said.
While he described stronger reserves as critical for macroeconomic resilience, he noted that such programmes also raise policy considerations.
“Initiatives of this scale raise questions regarding liquidity conditions, the impact on the central bank’s balance sheet, and the interaction between reserve accumulation and monetary policy operations.”
Banking sector sound, but credit growth subdued
The Governor also pointed to the role of the banking sector in ensuring effective monetary policy transmission.
According to him, Ghana’s banking sector remains stable and well-capitalised.
“The banking sector remains sound, profitable and well capitalised, with asset quality improving meaningfully over the past year.”
However, he said credit growth remains relatively weak, which the committee will examine further.
“We need to evaluate whether the constraint is from the supply side, whether it is on the side of banks in terms of risk appetite, capital buffers or non-performing loans, or whether it is from the demand side in terms of weak borrower demand.”
Balancing domestic gains with global uncertainty
Dr. Johnson Asiama emphasised that while Ghana’s macroeconomic indicators have improved significantly, policymakers must avoid declaring victory too soon.
“The question before the committee is not whether conditions have improved. They have indeed, significantly and across the board.”
He stressed that the central bank must weigh the progress made against emerging global risks.
“We must make our decision at the intersection of domestic success and growing external uncertainty.”
The 129th MPC meeting is expected to review inflation trends, macroeconomic conditions and global developments before the Bank of Ghana announces its next Monetary Policy Rate decision on Wednesday, 18th March, 2026.
