The Bank of Ghana (BoG) has identified mounting pressure on the country’s external position as one of the key risks confronting the Monetary Policy Committee (MPC) as it considers its latest policy stance. Governor Dr Johnson Asiama says the decline in international reserves, a weaker current account and a slowdown in gold shipments require careful assessment, particularly ahead of the expected increase in foreign exchange demand in the fourth quarter.
Dr Asiama noted that gross international reserves currently provide about 4.2 months of import cover, while the current account is projected to record a deficit in the third quarter. Gold shipments have slowed, with GoldBod pausing exports since mid-August. He emphasized that rebuilding reserves will be a key priority for the bank in the coming months.
The external position will determine how much policy space the Bank of Ghana can safely use, despite relatively stable domestic macroeconomic conditions. Dr Asiama said the domestic position affords policy space, but the external position determines how much of it can safely be used. Rising global risks, including the Middle East conflict pushing up energy prices and creating tighter global financial conditions, are also a concern.
The Governor cited the increase in Brent crude prices from above $85 per barrel at the previous MPC meeting to about $107 per barrel as of last week. The stronger US dollar and tighter global financial conditions have also weighed on emerging-market currencies, including the cedi. Domestically, headline inflation stood at 5% in August, although this remains below the Bank’s target band of 8% ±2%.
However, inflation has increased from a low of 3.2% in March to 5% in August, prompting the committee to assess whether the rise represents a temporary adjustment or could develop into more persistent inflationary pressure. The MPC will also consider developments in private-sector credit, fiscal policy and the implications of higher domestic borrowing for liquidity and the exchange rate.
At its previous meeting in July, the committee unanimously maintained the policy rate at 14%. Dr Asiama said the key question before the 132nd MPC is whether the current policy rate remains an appropriate anchor for inflation expectations given the changing balance of risks. The meeting is the first MPC session under Ghana’s new 36-month Policy Coordination Instrument with the International Monetary Fund, approved by the IMF Executive Board in July 2026.
The Bank of Ghana will need to carefully balance these competing risks when making its policy decision. The Governor's comments suggest that the central bank is likely to take a cautious approach, given the uncertain global economic environment and the need to maintain stability in the foreign exchange market. The MPC's decision is expected to have a significant impact on the economy, and stakeholders are eagerly awaiting the outcome.
Key points
- The Bank of Ghana has identified external sector pressures as a key risk to the economy.
- The central bank is expected to take a cautious approach when making its policy decision.
- The MPC's decision will have a significant impact on the economy.
