Ghana’s latest Monetary Policy Committee (MPC) report, released in January 2026, paints a picture of macroeconomic triumph.
Headline inflation dropped from 23.8 percent in December 2024 to 5.4 percent by the end of 2025. The cedi appreciated by over 40 percent against the US dollar. Foreign reserves increased to US$13.8 billion, covering nearly six months of imports.
Meanwhile, GDP growth increased to 6.1 percent, prompting the MPC to cut the policy rate by 250 basis points to 15.5 percent.
On paper, everything looks excellent. In practice, many Ghanaians experience something very different. Businesses complain about persistently high borrowing costs despite cumulative interest rate cuts of 900 basis points during 2025. Households see falling inflation numbers, but feel no relief in their daily expenses. Investment remains subdued, and credit remains tight. The disconnect between official reports and lived experience has fueled frustration—and confusion.
So why do MPC reports sometimes feel out of touch? The answer lies not in poor analysis, but in the structure of Ghana’s economy.
The Growth Puzzle
At first glance, Ghana’s macroeconomic numbers seem contradictory. The MPC describes monetary conditions as “tight relative to prevailing inflation,” yet GDP growth exceeds 6 percent. How can an economy grow rapidly when credit is expensive and scarce?
The answer is sectoral: growth is concentrated in areas that are largely insulated from domestic credit conditions. Services, agriculture, extractive industries, and donor-supported projects have driven the recent expansion. These sectors rely more on foreign capital, exports, or grants than on local borrowing. They can thrive even when interest rates are high.
In short, growth is real, but narrow. It does not translate into broad improvements in financial access or household purchasing power. Monetary policy only ends up restraining the relatively small formal and credit-dependent sectors of the economy.
Why Monetary Policy Feels Ineffective
Many Ghanaians do not rely on banks for their livelihoods. Subsistence farmers, informal traders, and micro-entrepreneurs make decisions based on food prices, transport costs, weather, and informal loans, not central bank rates.
As a result, changes in the Monetary Policy Rate mainly affect formal businesses, SMEs, and salaried workers. For the majority, the effects of tightening or loosening are minimal. This is not a failure of the central bank; it is a structural issue. Monetary policy is simply less effective in a relatively large informal economy.
Inflation: A Supply-Side Story
The drop in headline inflation, from 23.8 to 5.4 percent, is impressive, but the drivers are not primarily monetary.
In Ghana, inflation often stems from supply-side pressures:
• Exchange-rate pass-through in an import-dependent economy;
• Food shortages and logistics inefficiencies;
• Fuel, transport, and utility price adjustments;
• Taxes, levies, and other administered costs.
Raising interest rates does little to address these supply-sideissues. At best, it helps stabilize expectations and supports the cedi; at worst, it slows domestic demand while prices adjust only gradually. This explains why tight monetary policy, weak private-sector activity, and stubborn prices can coexist.
The Central Bank’s Tightrope
The Bank of Ghana is not acting irrationally, though. It must maintain exchange-rate credibility, manage capital flows, anchor inflation expectations, and honor IMF program commitments. Monetary tightening is often defensive, designed to preserve stability rather than stimulate growth.
The problem lies in expectation: many assume interest-rate changes alone can fix structural issues in the economy. They cannot.
Rethinking Monetary Policy in Ghana
Interest rates are a blunt demand management instrument in a highly informal, import-dependent economy.
For monetary policy to be more effective over time, Ghana needs:
• Deeper financial inclusion, so more Ghanaians are connected to the formal banking system;
• Improved domestic production capabilities to reduce excessive reliance on imports;
• Stronger coordination between fiscal and monetary policy;
• Exchange-rate credibility built on real foreign-exchange supply rather than interest rates alone.
Until these structural changes occur, monetary policy will remain necessary but limited. The apparent contradictions in MPC reports reflect not incompetence, but the structural constraints of the economy.
Conclusion
Ghana’s MPC reports often confuse the public not because the central bank is misguided, but because monetary policy is being asked to do more than it can structurally achieve. Recognizing these limits, and communicating them clearly, would allow debate to shift from frustration over numbers to discussion of real solutions: deepening financial access, strengthening domestic production, and building an economy where monetary tools can reach everyone.
By Samuel Owusu, PhD
Economist, Garden City University, Kenyasi
Author’s Note: Samuel Owusu (PhD) is an economist and lecturer in the Department of Business Studies, Garden City University, Kenyasi. His research interests include applied microeconomics and development economics, with a focus on how economic policy affects production, employment, and welfare.
