The Bank of Ghana (BoG) has withdrawn approximately GH¢14.6 billion from the financial system through its 14-day bill auction as part of ongoing open market operations aimed at tightening liquidity conditions and supporting the country’s disinflation process.
The liquidity sterilisation exercise forms part of the central bank’s broader monetary policy strategy designed to absorb excess liquidity in the banking sector and maintain macroeconomic stability. By withdrawing surplus funds from circulation, the central bank seeks to reduce inflationary pressures and reinforce confidence in the country’s monetary framework.
Open market operations remain one of the most effective tools available to central banks to regulate liquidity in the financial system. Through this process, the Bank of Ghana issues short-term securities that commercial banks and other financial institutions can purchase, allowing the central bank to temporarily remove cash from the system.
The latest operation reflects the regulator’s continued commitment to maintaining disciplined monetary conditions as Ghana’s economy gradually stabilises.
Inflation Shows Signs of Sustained Decline
The liquidity absorption exercise comes at a time when inflationary pressures in the economy are easing. Ghana’s year on year inflation rate slowed to 3.3 percent at the end of February 2026, down from 3.8 percent recorded in January.
This marks one of the lowest inflation levels recorded in recent years and reflects the cumulative impact of tight monetary policies implemented by the Bank of Ghana. The decline also signals improving macroeconomic fundamentals following a prolonged period of high inflation and economic instability.
The central bank’s efforts to control liquidity in the financial system have played a critical role in supporting this downward trend. By limiting the availability of excess cash within the banking sector, monetary authorities are able to reduce spending pressures that could otherwise drive up prices.
The sterilisation exercise is therefore part of a broader strategy to consolidate the gains already achieved in stabilising inflation.
Understanding Ghana’s Money Supply
According to the Bank of Ghana’s September 2025 Monthly Statistical Bulletin, total money supply, commonly referred to as M2+, stood at GH¢353 billion.
Money supply represents the total stock of money circulating within the economy. It includes physical currency such as banknotes and coins as well as highly liquid financial assets held in bank accounts and money market instruments.
Monitoring the level of money supply is essential for effective economic management. When money supply expands too quickly, it can lead to inflation as more money chases the same quantity of goods and services. Conversely, controlling liquidity growth can help stabilise prices and maintain the purchasing power of the national currency.
The Bank of Ghana therefore closely tracks changes in money supply as part of its monetary policy decision making process.
Strong Investor Demand For BoG Bills
The latest auction results also reveal strong investor appetite for short term securities issued by the central bank.
According to the Bank of Ghana, bids submitted by investors fell within a narrow range of 11.88 percent to 11.94 percent per annum. All successful bids were allotted within this range, indicating strong market confidence in the instrument.
The auction eventually closed at a weighted average discount rate of 11.93 percent. This translates into an equivalent interest rate of 11.99 percent per annum.
The strong demand highlights the attractiveness of central bank securities as a low risk investment option for financial institutions seeking short term returns while maintaining liquidity management strategies.
Market analysts note that the continued appetite for these instruments suggests confidence in Ghana’s evolving macroeconomic outlook and the credibility of the central bank’s policy direction.
Role of Liquidity Sterilisation in Economic Stability
Liquidity sterilisation is a key monetary policy tool used by central banks worldwide to control the amount of money circulating within an economy.
By issuing short term bills and absorbing excess funds from banks and financial institutions, central banks can stabilise interest rates, control inflation, and maintain financial system stability.
In Ghana’s case, the recent GH¢14.6 billion withdrawal represents one of several measures aimed at sustaining the current disinflation momentum. The move also demonstrates the central bank’s determination to ensure that inflation continues to decline in a controlled and sustainable manner.
Maintaining tight liquidity conditions also helps strengthen investor confidence, particularly among foreign investors monitoring Ghana’s macroeconomic recovery.
Outlook for Monetary Policy
Going forward, analysts expect the Bank of Ghana to maintain a cautious policy stance as it works to safeguard the gains made in stabilising the economy.
While inflation has declined significantly, policymakers remain mindful of potential risks such as exchange rate volatility, global commodity price fluctuations, and shifts in international financial conditions.
As a result, continued liquidity management operations may remain a key feature of the central bank’s policy toolkit in the months ahead.
For the financial sector, the recent operation underscores the Bank of Ghana’s commitment to prudent monetary management and its focus on ensuring long term price stability and economic resilience.
READ ALSO: GSE Composite Index Breaks New Milestone, Crosses 14,000 Mark
