Middle East Tensions Threaten Ghana’s Disinflation Gains – BoG Warns

Governor of the Bank of Ghana, Dr. Johnson Asiama, has cautioned that rising geopolitical tensions in the Middle East pose a significant threat to Ghana’s recent progress in reducing inflation, despite notable improvements in the country’s macroeconomic environment.

Speaking at the opening of the 129th Monetary Policy Committee (MPC) meeting, the Governor said developments in the global geopolitical landscape would play an important role in the Committee’s policy considerations.

“The external environment has changed since our last meeting. A significant external development has entered the picture, and that has to do with the escalation of the conflict in the Middle East.

“This conflict is disrupting key energy and shipping corridors. It is increasing volatility in global oil markets and introducing new uncertainty into the trajectory of global inflation,” he said.

Imported inflation remains a major risk

Dr. Asiama explained that rising global oil prices driven by the conflict could directly filter into domestic inflation.

“For Ghana, the transmission channels are clear. Sustained oil price increases could raise the risk of imported inflation and could also tighten global financial conditions.”

He noted, however, that geopolitical turmoil often boosts global gold prices  a potential benefit for Ghana.

“Geopolitical uncertainty tends to support gold prices. You know the role of gold in our equation. This could benefit our trade balance.”

Even so, he emphasised that the overall balance of risks remains tilted toward inflationary pressures.

Inflation falls below target band, creating new policy dilemma

The Governor revealed that Ghana’s inflation has now dropped to 3.3%, which is below the BoG’s own target band.

“At 3.3 percent, inflation is not just within the band; it is below the lower band.”

He said the MPC must now carefully assess how its current policy stance interacts with improving economic conditions and recovering credit.

Reserve accumulation plan under scrutiny

Dr. Asiama also highlighted the government’s newly launched Ghana Accelerated National Reserve Accumulation Programme (GANRAP), designed to expand Ghana’s international reserves dramatically.

“It seeks to raise international reserves to 50 months of import cover by 2028, compared to current levels of around 5.8 months.”

While acknowledging the importance of stronger reserves, he warned that the programme could affect liquidity, the central bank’s balance sheet, and monetary policy operations.

Banking sector stable, but credit growth remains weak

The Governor said the banking sector remains robust.

“The banking sector remains sound, profitable and well-capitalised, with asset quality improving meaningfully over the past year.”

However, he noted that credit growth continues to lag, requiring further examination.

“We need to evaluate whether the constraint is from the supply side banks’ risk appetite, capital buffers, or NPLs  or from the demand side, such as weak borrower demand.”

Balancing domestic progress with external risks

Dr. Asiama stressed that Ghana has made undeniable progress, but global uncertainty requires caution.

“The question before the committee is not whether conditions have improved. They have indeed, significantly and across the board.”

He said policymakers must avoid complacency and weigh local gains against worsening global risks.

“We must make our decision at the intersection of domestic success and growing external uncertainty.”

The 129th MPC meeting will review inflation trends, macroeconomic conditions, and global developments before the Bank of Ghana announces its next Monetary Policy Rate decision on Wednesday, March 18, 2026.