Middle East Tensions Could Derail Ghana’s Inflation Progress – BoG Governor

Middle East Tensions Could Derail Ghana’s Inflation Progress – BoG Governor

The Governor of the Bank of Ghana, Dr. Johnson Asiama, has raised concerns that rising tensions in the Middle East may pose a threat to Ghana’s recent achievements in reducing inflation. Despite recent improvements in the country’s macroeconomic indicators, Dr. Asiama warned that global developments could impact Ghana’s monetary policy in the coming months.

Speaking at the 129th meeting of the Monetary Policy Committee (MPC), Dr. Asiama explained that escalating conflicts in the Middle East are disrupting critical global energy and shipping routes, leading to volatility in international oil markets. This, he noted, could introduce fresh uncertainties in the global inflation outlook.

The Governor cautioned that higher oil prices, driven by geopolitical tensions, could lead to increased domestic inflation through higher import costs. “For Ghana, the transmission channels are clear. Prolonged oil price hikes could increase the risk of imported inflation and tighten global financial conditions,” he said.

However, Dr. Asiama also pointed out that the situation could have some positive effects on Ghana’s economy, particularly through rising gold prices. “Geopolitical instability often supports gold prices, and given the role of gold in our export earnings, this could improve our trade balance,” he remarked.

Despite this potential upside, Dr. Asiama stressed that the overall risks remain tilted toward inflationary pressures, which the MPC must carefully consider in its upcoming policy decisions.

The Governor also highlighted Ghana’s current inflation rate, which has fallen to 3.3%, below the Bank of Ghana’s target range. This, he said, presents a new challenge for the committee in terms of policy-making.

Additionally, Dr. Asiama shared that the MPC would review the government’s new Ghana Accelerated National Reserve Accumulation Programme (GANRAP). The initiative aims to significantly boost Ghana’s foreign reserves, targeting 50 months of import cover by 2028, compared to the current level of about 5.8 months.

While stronger reserves are seen as crucial for enhancing Ghana’s economic resilience, Dr. Asiama noted that such programs could have broader implications for liquidity conditions, the central bank’s balance sheet, and the conduct of monetary policy.

Story:Efua Nessa

Source : Locotvgh.com