BoG intensifies liquidity mop-up to curb inflation

The Bank of Ghana (BoG) has stepped up efforts to manage liquidity in the financial system, withdrawing GH¢28.21 billion from commercial banks through two separate 14-day bill auctions as part of measures to keep inflation under control while safeguarding the country’s economic recovery.

The auctions, conducted on July 27 and July 29, 2026, highlight the central bank’s continued use of BoG bills to absorb excess cash circulating within the banking sector and reinforce its inflation-targeting policy.

Unlike Treasury bills, which are issued to finance government expenditure, 14-day BoG bills are sold only to commercial banks and are used solely as a monetary policy tool to regulate liquidity in the economy.

The latest intervention comes as liquidity in the banking system has improved significantly following an extended period of tight monetary policy.

Recent data from the central bank show that reserve money, which had declined earlier in the year, has recovered strongly, while growth in the broader money supply has also accelerated.

According to BoG’s latest monetary statistics, total liquidity—comprising broad money and foreign currency deposits—increased by 28.5 percent year-on-year to GH¢417.6 billion in June. Reserve money also climbed 31.7 percent to GH¢148.5 billion, supported mainly by higher reserve holdings of commercial banks.

The increase in liquidity has been driven by stronger deposit growth, easing interest rates and improved external sector performance, particularly higher export earnings that strengthened Ghana’s net foreign asset position.

During its May Monetary Policy Committee (MPC) meeting, the Bank of Ghana noted that interbank lending rates had remained near the lower end of the policy corridor, an indication that liquidity levels in the banking sector were above normal.

Economic analysts say the central bank’s liquidity sterilisation strategy is designed to prevent excess funds from putting upward pressure on inflation, increasing speculative demand for foreign exchange and driving excessive spending in the economy.

At the same time, the BoG is seeking to avoid withdrawing too much liquidity, which could tighten credit conditions, raise borrowing costs and slow the pace of economic recovery.

BoG Governor Dr. Johnson Pandit Asiama has identified liquidity management and inflation control as central priorities of monetary policy. He recently announced the termination of the central bank’s pre-financing arrangements for domestic gold purchases effective July 1, a move expected to further limit liquidity injections into the financial system.

Market analysts believe the central bank’s ability to strike the right balance between containing inflation and sustaining economic growth will play a crucial role in preserving Ghana’s recent macroeconomic stability and supporting the country’s ongoing recovery.

Prince Antwi

See Full Bio