New data from the Bank of Ghana reveals a sustained contraction across key monetary indicators as authorities maintain aggressive policies to combat inflation.
The May 2025 economic summary shows reserve money growth nearly halved from 74.2% to 38.0% between January and April, while broader money supply measures followed similar downward trends.
The tightening appears deliberate and comprehensive. Commercial bank reserves plummeted from 39.5% to 16.8%, foreign currency deposits crashed from 36.2% to 12.9%, and real private sector credit growth turned negative (-1.1%) for the first time in years. The central bank’s net domestic assets shifted dramatically from +10.0% to -10.9%, reflecting reduced government borrowing.
“This is textbook monetary contraction,” said University of Ghana economist Dr. Adu Owusu Sarkodie. “The IMF-backed program demands fiscal consolidation and tight money policies to stabilize the economy.” While acknowledging the strain on businesses facing 20% lending rates, he argued the trade-off is necessary: “Businesses suffer more from high inflation than from tight credit.”
The strategy shows early successes. Net foreign assets grew 46 percentage points to 261.7%, supported by cedi appreciation and improved reserve management. Inflation has begun retreating from its peak, with Dr. Sarkodie predicting single-digit rates by year-end if current policies hold.
However, the dramatic liquidity pullback raises questions about sustaining private sector growth. As monetary authorities walk this tightrope, Ghana’s economic team faces mounting pressure to balance disinflation with maintaining adequate credit flow to productive sectors of the economy.
