While the economy is currently enjoying lower-level inflation, which is now a single digit, the Bank of Ghana (BoG) is bearing the brunt and paying a heavy price for it.
The BoG’s fight to tame inflation and stabilise the cedi has come at a heavy price of about GHC85 billion to the Central Bank’s balance sheet.
This heavy price was revealed by the Governor of the Central Bank at the ongoing IMF/World Bank Annual Meetings. The governor says its market operations, such as sterilization and other measures, are draining the bank. However, he believes the cost is a necessity since price stability is not negotiable, given their mandate.
The cost means that the central bank is using its own money to control inflation. This is the effort to suck liquidity out of the system to prevent prices from rising too fast. This helps to keep the value of the cedi steady and protect ordinary Ghanaians from runaway prices.
But it’s expensive. Each time the Bank sells bonds or bills to absorb extra cash, it must pay very high interest to investors, and those payments add up quickly.
For instance, the bank’s sterilization efforts, mopping excess liquidity through the sale of bonds, has cost the BoG GHC65 billion out of the total cost of GHC85 billion.
“The cost to the central bank’s balance sheet has been immense. To give you an idea, OMO[Open Market Operations] stock is currently around GHC85 billion. And out of that, the sterilisation we have done this year alone accounts for about 65 billion. And so, yes. But there’s a price to stabilisation. There’s a cost to stabilisation,” Dr. Asiama narrated.
Despite the high cost, he stressed that stability is a “public good”, something that benefits everyone. When inflation is under control, businesses can plan, investors feel confident, and households can manage their expenses without constant fear of rising prices; hence, there is a need to pay the price for the general welfare of the economy.
To address the high cost, the governor announced that the Central Bank is in talks with the government to share the burden of the cost incurred to reduce inflation.
“We are in discussions with the fiscal authorities for them to assist us, probably to pick up part of that cost. But as they always say, stability is a public good. When there’s macroeconomic stability, there’s a cost to it. Someone needs to pay for it. So far, we are in that discussion,” he added.
The Bank’s tough measures have helped push inflation down sharply, from nearly 24% in December 2024 to just 9.4% in September, one of the lowest levels seen in recent times.
While the achievement has been widely praised, the Governor’s comments reveal the financial sacrifices being made behind the scenes to sustain Ghana’s economic recovery.
