When the Finance Minister first announced the government’s bold ambition to slash inflation from 23.1% to 11.9% by the end of 2025, many wondered: is this a realistic target or just wishful thinking? Now, the Governor of the Bank of Ghana, Dr. Johnson Asiama, has weighed in—not with outright skepticism, but with a strong warning: without a policy reset, this goal may be harder to achieve than the government hopes.
At a recent monetary policy press briefing in Accra, Dr. Asiama acknowledged that inflation had eased marginally but remained high, with both food and non-food inflation above expectations. More importantly, he pointed to past fiscal and monetary missteps as key drivers of Ghana’s persistent inflation woes. His message? A reset of policy is needed to re-anchor the disinflation process.
“To restore price stability going forward will require a tight monetary policy stance, strong liquidity management, and unwavering commitment to the 2025 budget, which seeks to reset the fiscal consolidation process,” Dr. Asiama stated.
Does the Bank of Ghana See This as an Uphill Battle?
The Governor’s call for a reset suggests that hitting 11.9% inflation won’t be a straightforward ride. The economy has endured a rough patch—inflation soared beyond 50% in 2022, driven by global supply chain shocks, currency depreciation, and surging fuel prices. While inflation eased to 23.2% by the end of 2023, achieving single digits will require more than just optimism.
Yet, some experts believe it’s possible. Financial economist Prof. Lord Mensah of the University of Ghana Business School is optimistic.
“Yes, someone would say it’s overly ambitious, but looking at the rate at which interest rates, especially at the short-term end of the market, have dropped over the past few months, I can tell you that there is a possibility of bringing inflation down to that level,” he told The High Street Journal.
What Could Make or Break This Inflation Target?
Dr. Asiama and Prof. Mensah agree that certain key factors will determine whether Ghana meets its target:
- Fiscal Discipline: Can the government resist excessive borrowing and cut unnecessary spending?
- Exchange Rate Stability: Will the cedi remain stable, or will external shocks derail progress?
- Sectoral Interventions: Can Ghana produce enough food locally under the Agriculture for Economic Transformation Agenda to reduce reliance on imports and lower inflationary pressures?
Beyond inflation control, the government is also betting on a 4% economic growth rate for 2025. While Prof. Mensah sees this as feasible, he warns that planned tax hikes in mining and quarrying could slow economic momentum.
Dr. Obeng-Okon: A Critical Look at Monetary Policy
Adding to the debate, economist and senior lecturer at GIMPA, Dr. Raziel Obeng-Okon, challenges Ghana’s monetary policy approach. He argues that inflation cannot be tackled effectively without addressing the structural issues within the economy—particularly agriculture and employment.
“The food index alone accounts for about 40% of the inflation basket. So, number one, we need to ensure we do something about agriculture, food, and drinks.”
Dr. Obeng-Okon also questions the assumption that excess liquidity is the primary cause of inflation, noting that Ghana is far from operating at full employment.
“If there’s liquidity in the system and it finds its way into productivity, it shouldn’t be inflationary. The real issue is whether we are allocating our resources effectively.”
A Race Against Time
With just nine months to go, the question remains: Will Ghana’s inflation curve bend as sharply as the Finance Minister hopes, or will economic realities force a rethink? The Bank of Ghana has made its position clear—a policy reset is non-negotiable.
