Bank of Ghana Revamps Monetary Policy Toolkit to Improve Transmission and Stimulate Private Sector Credit

Strategic Insights -

As the central bank takes steps to revamp its monetary policy toolkit, Governor Dr. Johnson Pandit Asiama emphasized the need for clear and accessible post-meeting communication to anchor expectations and sustain public trust in the central bank's commitment to price stability. The Bank of Ghana (BoG) is transitioning towards a more dynamic Open Market Operations (OMO) regime, moving away from its traditional reliance on the unremunerated Cash Reserve Ratio (CRR). This shift includes deploying longer-tenor central bank instruments aimed at improving liquidity management and enhancing the effectiveness of policy signals across financial markets.

Key Takeaways:

  • The Bank of Ghana is revamping its monetary policy toolkit to improve transmission and stimulate private sector credit, with a focus on transitioning towards a more dynamic Open Market Operations (OMO) regime.
  • The central bank has introduced a 273-day sterilisation bill and launched a review of the cash reserve ratio framework to further strengthen monetary policy transmission.
  • The total mop-up in just four months of 2025 represents nearly 60 percent of the entire 2024 total of GHS134 billion, underscoring BoG's intensified effort to control money supply and stabilise the macroeconomic environment.
  • The Bank's overhaul of its liquidity management strategy comes as authorities work to rebuild credibility and improve monetary policy's effectiveness, with a focus on providing commercial banks with greater flexibility and predictability in managing their liquidity positions.
  • Analysts have long noted that the CRR-based framework had limited capacity to influence market interest rates and often restricted credit flows to the private sector.
  • The new tools are expected to provide commercial banks with greater flexibility and predictability in managing their liquidity positions, potentially unlocking more lending to households and businesses.
  • The meeting comes on the heels of other positive developments, including Ghana securing a Staff-Level Agreement with the International Monetary Fund on the fourth review of its Extended Credit Facility programme, and an upgrade in Ghana's sovereign rating from Selective Default to CCC+ by S and P Global.
  • Despite these gains, risks remain, with potential inflationary flare-ups stemming from food supply disruptions, global commodity volatility, and geopolitical tensions that could weigh on capital flows and trade dynamics.

Statistics:

  • Total mop-up in just four months of 2025: GHS79.8 billion, representing nearly 60 percent of the entire 2024 total of GHS134 billion.
  • Increase in mop-up from 2024 to 2025: 76.6 percent.
  • Record mop-up in April 2025: GHS33.3 billion, following the 123rd Monetary Policy Committee meeting in March 2025.
  • Local currency appreciation: nearly 19 percent between April and May 2025.
  • Inflation rate in April 2025: 21.2 percent, down from earlier highs.
  • Benchmark policy rate in March 2025: 28 percent, raised by 100 basis points to curb inflationary pressures.
  • Review of cash reserve ratio framework: launched to further strengthen monetary policy transmission.

Sources:

  • Ghana Web, "Bank of Ghana revamps monetary policy toolkit to improve transmission, stimulate private sector credit", 22 May 2025.
  • Bank of Ghana press release on the 124th Monetary Policy Committee meeting, 22 May 2025.