We drained excess liquidity injected by NPP into the system at a cost — BoG Governor
The Governor of the Bank of Ghana, Dr Johnson Asiama, has revealed that the central bank had to take decisive and costly measures to drain excess liquidity injected into the financial system under the previous New Patriotic Party administration.
According to him, the process of mopping up the surplus liquidity came at a significant cost but was necessary to stabilise the economy and restore the effectiveness of monetary policy.
Speaking in an interview with Bernard Avle on Channel One TV’s The Point of View on Wednesday, March 25, Dr Asiama explained that the economy was in a fragile state when the current administration led by John Dramani Mahama assumed office.
He likened the situation to a patient who had undergone prolonged treatment, noting that careful assessment and strategic intervention were required.
“It’s been a lot of work, a lot of thinking, and a lot of listening. We listened more to Ghanaians and designed our policies accordingly. When we came in, we did a lot of preparatory work and knew exactly what we were walking into. It was like having a patient who had been under treatment for a long time by another doctor,” he said.
Dr Asiama identified high inflation and exchange rate volatility as major challenges inherited at the time, stressing that excessive liquidity in the system had weakened the impact of policy measures.
“Remember the macroeconomic situation at the time—high inflation and exchange rate volatility. From 2022, a lot of liquidity was injected into the system. It was like a patient who had received excessive blood transfusions. Too much liquidity had been injected; no matter what you do, it won’t be effective. No matter the policies you implement, they won’t be effective,” he explained.
He reiterated that the Bank of Ghana had to act swiftly to absorb the excess liquidity, describing the intervention as critical despite the financial cost involved.