Ghana’s efforts to sustain lower inflation and exchange rate stability are bringing renewed attention to the financial cost of the Bank of Ghana’s (BoG) liquidity management operations, as reforms seek to improve how the Central Bank controls money supply and influences interest rates.
While tighter liquidity management has supported improvements in key economic indicators, concerns over the cost of absorbing excess cedi liquidity raise questions about the long-term financial sustainability of the monetary policy framework.
The issue is particularly important for businesses and investors because the effectiveness of liquidity management influences borrowing costs, credit availability, exchange rate conditions and the overall cost of doing business.
The International Monetary Fund (IMF), following its first review of Ghana’s 36-month Policy Coordination Instrument (PCI), said reforms to the Bank’s liquidity management framework were progressing, with outstanding measures expected to strengthen macroeconomic stability.
The reforms include introducing a seven-day bill as the main instrument for short-term liquidity management, replacing the existing 14-day bill, alongside unrestricted end-of-day access for banks to the Central Bank’s lending and deposit facilities.
The framework is also expected to be supported by clear rules governing the Bank’s daily monetary operations to improve transparency and predictability in the financial market.
The IMF staff team, led by Mr Ruben Atoyan, Mission Chief, visited Accra from October 22 to November 4 to assess progress under the programme.
The Fund said completing the outstanding reforms on schedule would help sustain Ghana’s macroeconomic gains and translate them into jobs and improved prosperity.
The liquidity management reforms are part of structural commitments carried over from Ghana’s Extended Credit Facility (ECF) programme, approved in May 2023, and subsequently refined during the final ECF review and the 2026 Article IV consultation.
At the 131st Monetary Policy Committee (MPC) press briefing in July, Dr Johnson Pandit Asiama, Governor of the Bank of Ghana, said the transition from the 56-day bill to the 14-day bill had made liquidity management more responsive to changing market conditions.
He explained that shorter-dated instruments allowed the Bank to assess liquidity conditions more frequently and adjust its operations to improve the transmission of monetary policy.
“The ultimate objective is to manage liquidity in a way that supports the inflation target. To achieve this, liquidity conditions are reviewed on a weekly basis, and the available instruments are adjusted accordingly,” he said.
However, an analysis of the Bank’s audited 2025 financial statements by Mr Bright Simons, Vice President of IMANI Centre for Policy and Education, raised concerns about the financial cost of sustaining the framework.
He acknowledged the improvements in economic conditions, including the decline in inflation to 5.4 percent, an increase in gross international reserves to US$11.9 billion, equivalent to about four months of import cover, and the cedi’s 40.7 percent appreciation against the US dollar in 2025.
However, he argued that the operating model supporting the gains was financially unsustainable and could limit the Central Bank’s ability to absorb future economic shocks.
Mr Simons attributed the losses partly to the cost of sterilising excess cedi liquidity, explaining that the Bank borrowed at interest rates of between 15 and 27 percent while earning returns of only four to five percent.
He also cited declining revenue from money creation as an additional pressure on the Bank’s financial position.
The concerns place greater importance on the ongoing reforms, particularly their ability to improve the efficiency of liquidity operations while reducing the financial burden associated with controlling excess money in the banking system.
For businesses, a more predictable and efficient liquidity framework could improve the transmission of monetary policy, support more stable interest rate conditions and strengthen confidence in the financial system.
The IMF also said other structural reforms, including the rollout of the Integrated Tax Administration System, operationalisation of the Fiscal Council and preparation of the Fiscal Risk Statement, remained on track.
The broader reform agenda is expected to strengthen fiscal and monetary policy institutions, improve economic management and protect the gains made under Ghana’s economic recovery programme.
