Rising geopolitical tensions in the Middle East could threaten Ghana’s recent progress in reducing inflation, the governor of the Bank of Ghana said Monday, as policymakers opened deliberations on the country’s monetary policy outlook.
Governor Johnson Asiama told members of the central bank’s Monetary Policy Committee that the global environment has shifted since its last meeting, with escalating conflict in the Middle East introducing fresh uncertainty into energy markets and global inflation dynamics.
The conflict has disrupted key energy and shipping routes, increasing volatility in global oil prices, he said—developments that could feed into domestic price pressures.
“For Ghana, the transmission channels are clear,” Dr. Asiama said. Sustained increases in oil prices could raise the risk of imported inflation and tighten global financial conditions, he noted.
Ghana, which imports refined petroleum products, is particularly vulnerable to oil price swings that can push up transportation and production costs across the economy.
The governor said geopolitical tensions may also produce some offsetting benefits for the West African economy. Periods of global uncertainty typically support higher gold prices, potentially improving Ghana’s trade balance given the country’s status as one of the world’s leading gold exporters.
Still, he cautioned that the net effect of the external shock is likely to be inflationary.
“Taken as a whole, the balance of risks from this development points to inflation,” he said, adding that the issue will feature prominently in the committee’s deliberations.
The remarks come as Ghana records stronger macroeconomic indicators following a period of economic stress.
Inflation has fallen sharply to 3.3%, slipping below the central bank’s target band and presenting policymakers with a new challenge as economic activity begins to recover and credit growth shows early signs of improvement.
The central bank must now assess whether its current policy stance remains appropriate given evolving domestic and global conditions, Mr. Asiama said.
Officials are also reviewing the government’s proposed Ghana Accelerated National Reserve Accumulation Programme, an initiative aimed at significantly strengthening the country’s external buffers.
Under the plan, authorities hope to raise international reserves to the equivalent of 50 months of import cover by 2028, compared with roughly 5.8 months currently.
Dr. Asiama said such efforts could enhance macroeconomic resilience but also raise important policy questions, including the implications for liquidity conditions, the central bank’s balance sheet and the interaction between reserve accumulation and monetary policy operations.
The governor added that Ghana’s banking sector remains stable and well capitalized, with improving asset quality and profitability. Credit growth, however, remains subdued, prompting policymakers to examine whether the weakness reflects cautious lending by banks or limited borrowing demand.
The central bank’s Monetary Policy Committee is expected to conclude its meeting later this week and announce its latest interest-rate decision on Wednesday.
Source:TheDotNews