Nelson Cudjoe Kuagbedzi, Head of Finance at UMB Capital, argued on JoyNews’ AM Show on Friday, May 1, that the Bank of Ghana’s (BoG) success should be evaluated by its adherence to its primary mandate of price stability, rather than solely by its balance sheet figures. The discussion centered on the central bank’s recent policy interventions aimed at stabilizing the Ghanaian economy.
Understanding the Central Bank’s Role
Kuagbedzi clarified a common misunderstanding regarding the Bank of Ghana’s function, differentiating it from commercial banks.
Unlike profit-driven commercial entities, the BoG does not engage in financial intermediation. Its core duty, as stipulated in Section 3 of the Bank of Ghana Act, 2002 (Act 612), is to ensure general price stability within the economy.
Achieving this stability necessitates the deployment of various monetary policy tools, which can incur significant costs. “The core mandate of the Bank of Ghana is to maintain price stability,” Kuagbedzi stated. “When you read Section 3 of the Bank of Ghana Act, it clearly states that the primary mandate of the Bank is to maintain the stability of general prices in the economy.”
He stressed that the effectiveness of the central bank should be measured by its ability to meet this mandate, urging the public to assess whether price stability and policy rate transmission into market rates are achieved by the end of 2025.
Economic Landscape and Policy Interventions
Kuagbedzi provided a snapshot of the Ghanaian economy at the close of 2024 to contextualize the BoG’s performance. “At the end of 2024, the economy grew by 5.7%, but inflation stood at 23.8%, the currency depreciated by 20%, and lending rates were over 30%,” he reported.
The debt-to-GDP ratio was 61.8%, with a fiscal deficit of 7.9%. Low business and investor confidence characterized the challenging economic environment, exacerbated by high inflation.
Despite a policy rate of 27% and high lending rates making credit access difficult, the Bank of Ghana implemented several key interventions. These aimed to reverse the prevailing economic trends.
Four Pillars of Intervention
Kuagbedzi outlined four principal mechanisms employed by the BoG: a tight monetary stance, support for the banking sector, aggressive reserve accumulation, and management of foreign exchange (FX) operations.
“The Bank of Ghana took a tight monetary stance to curb inflation,” he explained. “They kept the policy rate high in order to absorb excess liquidity in the system, which helped stabilise inflation and the currency.”
Aggressive reserve accumulation strategies were also implemented, focusing on organic growth rather than relying on borrowed funds from the IMF.
Further measures included directives to market players, such as requiring mining companies to channel dollar receipts through designated banks. A fee for foreign currency withdrawals from bank accounts was introduced to curb informal FX trading.
Results and Economic Turnaround
By 2025, these interventions had led to significant improvements. Inflation dropped from 23.8% to 5.4%.
The Ghanaian cedi emerged as the best-performing currency in emerging markets. Lending rates decreased to approximately 20%.
The country’s debt-to-GDP ratio fell to 45.3%, and international reserves rose from $9.1 billion to $13.1 billion. “These policy interventions yielded substantial results,” Kuagbedzi stated. “We saw improvements in inflation, exchange rate stability, and investor confidence. The currency strengthened, and the cost of capital for businesses also reduced.”
The Cost of Stability
While the macroeconomic interventions proved effective, Kuagbedzi acknowledged they came at a cost to the Bank of Ghana.
The BoG absorbed excess liquidity by issuing high-interest bills. Due to the high inflation rates, these bills were expensive, significantly impacting the Bank’s income through interest expenses.
“In 2024, the Bank of Ghana’s losses were attributed largely to the high interest rates on the bills issued to absorb excess liquidity,” he explained. “The absorption of excess liquidity cost the Bank a significant amount, with the losses more than doubling from 8 billion Ghana cedis in 2024 to around 16 billion Ghana cedis in 2025.”
The domestic debt exchange program also affected the Bank’s earnings, leading to challenges for several banks in meeting capital adequacy requirements.
Future Outlook for BoG’s Financial Health
Kuagbedzi projected that the Bank of Ghana’s recovery hinges on sustained low inflation and reduced liquidity absorption needs.
With inflation falling to 3.2% by the end of March 2026, he anticipates a decrease in the BoG’s liquidity absorption requirements, which should improve its financial position.
“Looking ahead, we expect that the Bank of Ghana’s fiscal health will improve as inflation stays low and liquidity absorption reduces,” he concluded. “This will help stabilise the Bank’s equity position and reduce its paper losses.”
Ultimately, Kuagbedzi reiterated that the Bank of Ghana’s performance should be assessed against its mandate of price stability, not merely its balance sheet. “The discussion about the performance of the Bank of Ghana should focus on the achievement of its core mandate, as laid out in the Bank of Ghana Act, rather than just looking at its balance sheet,” he emphasized.
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