BY Grace Zigah
The Bank of Ghana (BoG) has intensified its fight against inflation and exchange rate pressures by withdrawing a massive GH¢17.24 billion from circulation through the sale of 14-day bills, underscoring Governor Dr. Johnson Pandit Asiama’s commitment to maintaining tight monetary conditions despite growing calls for increased credit to support businesses.
The latest liquidity absorption exercise, conducted on June 8, 2026, ranks among the largest open market operations undertaken by the central bank in recent months and reflects its determination to prevent excess liquidity from undermining the gains achieved in inflation control and exchange rate stability.
According to Notice to Banks and the Public No. 865, the auction attracted total allotments amounting to GH¢17.24 billion, with bids accepted at rates ranging from 10.46 percent to 10.95 percent.
The weighted average interest rate settled at 10.98 percent, highlighting prevailing conditions in the money market and the central bank’s continued use of monetary policy instruments to regulate liquidity levels.
The operation comes at a critical time when Ghana’s economy has recorded significant improvements in key macroeconomic indicators. Inflation, which stood at 23.8 percent at the end of 2024, has fallen sharply into single digits, while the cedi has enjoyed periods of relative stability following substantial foreign exchange interventions and reserve accumulation efforts by the central bank.
Governor Asiama has repeatedly defended the Bank’s strategy of maintaining relatively tight monetary conditions even as policy rates have been reduced.
During several recent engagements, including meetings with commercial bank executives and business leaders, he stressed that preserving macroeconomic stability remains the central bank’s overriding objective.
At the Bank’s post-Monetary Policy Committee engagements earlier this year, Dr. Asiama revealed that the central bank had incurred significant costs through sterilisation operations aimed at absorbing excess liquidity from the financial system.
According to him, these measures were necessary to anchor inflation expectations and protect the gains achieved through Ghana’s economic stabilisation programme.
The importance of liquidity management was further highlighted in the Bank of Ghana’s 2025 financial statements released in May 2026. The central bank disclosed that the cost of open market operations was one of the primary reasons behind its GH¢15.63 billion operating loss for the year.
The Bank explained that these expenses reflected deliberate policy actions aimed at bringing inflation under control and stabilising the economy.
Open market operations involve the issuance of short-term Bank of Ghana bills to absorb excess cash circulating within the banking system. Unlike Treasury bills, which are issued to finance government expenditure, BoG bills are designed specifically as monetary policy instruments.
By locking away surplus funds, the central bank reduces the amount of money available for speculative activities, particularly demand for foreign exchange, which can place pressure on the cedi.
Analysts say the latest GH¢17.24 billion auction demonstrates the Bank’s continued caution despite recent improvements in inflation and growth indicators. The move comes amid emerging concerns about global commodity price volatility, geopolitical tensions in the Middle East and potential inflationary risks associated with rising energy costs.
Speaking at the opening of the Monetary Policy Committee’s 130th meeting in May, Governor Asiama warned that prolonged Middle East tensions, elevated oil prices and domestic energy supply disruptions could threaten Ghana’s hard-earned macroeconomic stability if not carefully managed.
The Bank has consistently argued that excess liquidity poses a risk to inflation and exchange rate stability because surplus cash often finds its way into the foreign exchange market, increasing demand for dollars and weakening the cedi. By aggressively sterilising liquidity, policymakers hope to keep inflation expectations anchored and maintain orderly conditions in the foreign exchange market.
However, the strategy also presents a delicate balancing act. While liquidity absorption supports price stability, businesses and financial institutions have continued to advocate for greater credit expansion to drive economic growth.
The challenge for the central bank is ensuring that efforts to contain inflation do not excessively constrain lending to the private sector.
Dr. Asiama has acknowledged this trade-off, describing central banking as a continuous exercise in balancing competing priorities.
He has expressed optimism that as inflation remains low and stable, the need for costly liquidity mop-up operations will gradually decline, creating room for stronger private sector credit growth.
