BoG mop-up costs ease but remain elevated at GH¢17bn                       

By Joshua Worlasi AMLANU

The Bank of Ghana’s effort to stabilise the economy has carried a significant financial cost, with liquidity sterilisation expenses rising to about GH¢17billion in 2025 as the central bank intensified operations to absorb excess cash in the banking system following Ghana’s recent macroeconomic crisis.

Central bank Governor Dr. Johnson Pandit Asiama disclosed the figure while briefing parliament’s Committee on Economy and Development, describing the cost as a direct consequence of policy measures implemented to restore inflation control and strengthen monetary policy transmission.

The expenses stem largely from intensified open market operations (OMO) used to absorb excess reserves held by commercial banks. According to Governor Asiama, the central bank had to scale up these operations to address a large liquidity overhang that had weakened the effectiveness of monetary policy.

“When the central bank absorbs excess liquidity from the banking system, it pays interest on the instruments used to temporarily hold those funds,” Dr. Asiama told lawmakers. “As policy interest rates remained elevated during the stabilisation period, the cost of these liquidity management operations naturally increased.”

Sterilisation costs declined from about GH¢18.14billion in 2024 to roughly GH¢17billion by the end of 2025, according the central bank’s annual report – reflecting the expanded scale of liquidity management operations during the period of tight monetary policy.

“These operations were essential to restore the effectiveness of monetary policy transmission and contain inflationary pressures,” the Governor said.

Before the crisis, sterilisation played a relatively modest role in liquidity management. According to the Bank’s 2022 annual report, it absorbed about GH¢5.66billion in 2020 and                           GH¢5.65billion in 2021 – when liquidity conditions in the financial system were more stable and monetary policy remained broadly accommodative following the COVID-19 shock.

The scale of liquidity absorption began to increase in 2022, when sterilisation rose to                       GH¢7.73billion as macroeconomic pressures intensified. Rising inflation, exchange rate depreciation and growing government financing needs prompted the central bank to step up its use of OMO instruments to withdraw liquidity from the financial system.

Sterilisation operations surged further in 2023 when the Bank of Ghana absorbed about               GH¢24.80billion through open market operations, marking the peak of liquidity management activity over the period.

The surge coincided with Ghana’s sovereign debt restructuring and adjustments following the Domestic Debt Exchange Programme (DDEP), which created distortions in liquidity conditions across the banking sector. During that period, the central bank relied heavily on liquidity absorption operations as part of a broader stabilisation effort aimed at restoring macroeconomic stability.

By 2024 sterilisation volumes moderated to GH¢18.14billion, suggesting some easing in liquidity pressures as policy tightening began to take effect and macroeconomic conditions gradually stabilised.

The estimated GH¢17billion of sterilisation costs for 2025 indicate a further gradual decline, although the level remains significantly above the roughly GH¢5–7billion range recorded before the crisis.

According to the central bank, the elevated level reflects persistence of structural excess liquidity in the banking system. Excess reserves held by banks had weakened transmission of the policy rate into market interest rates, limiting competition for deposits and keeping lending rates elevated.

To address this, BoG increased the frequency and volume of OMO issuance and sterilised inflows from foreign exchange interventions to prevent liquidity from re-entering the financial system. The central bank also stepped up coordination with the Ministry of Finance on government cash management to minimise unintended liquidity injections.

The liquidity management effort formed part of a broader stabilisation strategy launched as the economy entered 2025 under fragile conditions.

“When I assumed office as Governor in February 2025, the Ghanaian economy was emerging from one of the most challenging periods in recent history,” Dr. Asiama said. “The country had experienced a sovereign debt restructuring, sharp currency depreciation and a surge in inflation.”

Inflation had ended 2024 at 23.8 percent, well above the Bank of Ghana’s medium-term target band of 8 ± 2 percent, while the cedi depreciated 24.8 percent during the year. The financial system was also adjusting to effects of the debt restructuring programme, which placed pressure on bank balance sheets and constrained lending activity.

The central bank itself was affected by the restructuring, which imposed a 50 percent haircut on its holdings of government securities and reduced the income-generating capacity of its asset portfolio.

Additional financial pressures arose from valuation losses on foreign currency assets following appreciation of the cedi in 2025 and operational costs linked to the Bank of Ghana’s Domestic Gold Purchase Programme.

Despite these balance sheet effects, the Governor emphasised that the financial costs reflect policy measures required to restore stability.

“The financial effects that will be reflected in the Bank’s accounts are the accounting counterpart of stabilisation benefits now being realised across the Ghanaian economy,” he said.

Recent macroeconomic data suggest the stabilisation programme is delivering results. Headline inflation declined sharply from 23.8 percent in December 2024 to 5.4 percent by December 2025 before falling further to 3.3 percent in February 2026, according to the central bank.

The cedi also strengthened during 2025 as macroeconomic fundamentals improved and market confidence returned. At the same time, gross international reserves increased to                              US$13.8billion, equivalent to about 5.7 months of import cover. As inflation expectations eased, the Monetary Policy Committee reduced its policy rate by 900 basis points during 2025, bringing it to 18 percent by the end of the year and easing borrowing conditions across the economy.

In its outlook, the central bank expects cost pressures associated with liquidity management to decline gradually as macroeconomic conditions stabilise.

“As inflation declines and policy interest rates gradually normalise, the interest expense associated with absorbing excess liquidity in the banking system will also decline naturally,” Dr. Asiama said.

Nonetheless, the Bank of Ghana said it will maintain a cautious and data-driven approach to monetary policy as it consolidates the gains achieved during the stabilisation period, while monitoring risks from global financial conditions and commodity price volatility.

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