The Governor of the Bank of Ghana, Johnson Asiama, has cautioned that rising tensions in the Middle East could slow or reverse Ghana’s recent progress in reducing inflation, despite signs that the country’s broader economy is improving.
Speaking at the opening session of the 129th Monetary Policy Committee (MPC) meeting, the central bank chief explained that new geopolitical developments are adding uncertainty to the global economic outlook and could influence the committee’s policy decisions in the coming days.
According to him, the escalation of conflict in the Middle East is already affecting key global energy and shipping routes. This disruption is increasing volatility in international oil markets and creating uncertainty about the future direction of global inflation.
Rising oil prices could push inflation higher
Dr. Asiama warned that if oil prices remain elevated due to geopolitical tensions, Ghana could experience renewed inflationary pressure through imported costs.
He noted that higher global oil prices typically lead to increased fuel and transportation costs, which can feed directly into domestic prices for goods and services.
The governor explained that these developments could tighten global financial conditions as well, potentially affecting emerging economies such as Ghana.
Gold prices may offer some relief
While the situation poses risks, the governor said Ghana could see some benefits from rising global gold prices.
Periods of geopolitical instability often push investors toward gold as a safe asset. Since gold is one of Ghana’s key export commodities, stronger prices could improve the country’s trade balance and help support foreign exchange inflows.
However, Dr. Asiama stressed that the overall impact of the external shock is still likely to tilt toward inflationary pressures.
Inflation now below central bank target range
Another major issue before the MPC is the unexpected drop in inflation, which has fallen to 3.3 percent, below the central bank’s target band.
Dr. Asiama said the situation presents a policy challenge because the committee must determine whether current monetary policies remain appropriate as economic activity begins to recover and credit demand gradually improves.
New reserve accumulation plan under review
The MPC is also reviewing the government’s newly introduced Ghana Accelerated National Reserve Accumulation Programme (GANRAP), a plan designed to significantly strengthen the country’s external reserves.
The programme aims to increase Ghana’s international reserves to the equivalent of 50 months of import cover by 2028, up from the current level of about 5.8 months.
While building stronger reserves would improve the country’s ability to withstand external shocks, the governor said such a large programme could also affect liquidity in the financial system and influence how monetary policy operates.
Banking sector stable but lending remains slow
Dr. Asiama also highlighted the role of Ghana’s banking sector in supporting economic recovery.
He said the sector remains stable, profitable, and well-capitalised, with improvements in asset quality over the past year. However, credit growth to businesses and households remains relatively weak.
According to him, the MPC will examine whether the slowdown in lending is due to banks being cautious about risk or whether businesses and consumers are simply borrowing less.
Policy decisions ahead
Despite the positive progress in Ghana’s macroeconomic indicators, the governor warned against complacency, stressing that global risks remain significant.
He noted that the central bank must balance the country’s improving economic performance with emerging global uncertainties.
The 129th MPC meeting will assess inflation trends, global developments, and domestic economic conditions before the Bank of Ghana announces its next Monetary Policy Rate decision on March 18, 2026.
Source: Africa Publicity
