BoG absorbs GH¢21.41bn in one week through short-term bills

The Bank of Ghana has withdrawn GH¢21.41 billion in liquidity from the financial system within a week through a series of short-term operations aimed at managing excess funds in the banking sector.

The central bank used 14-day Bank of Ghana Bills for the operations, allowing it to temporarily take up liquidity from banks and other participating financial institutions ahead of its next monetary policy decision.

At the first tender conducted on Monday, the Bank of Ghana accepted the entire GH¢13.71 billion offered by participating institutions at an interest rate of 10.5%.

A second operation on Wednesday saw the central bank absorb an additional GH¢7.7 billion, also at 10.5%.

The two transactions brought the total amount taken out of the financial system through the 14-day instruments during the week to GH¢21.41 billion.

The scale of the liquidity absorption underscores the central bank's continued use of sterilisation operations to influence liquidity conditions and support the transmission of monetary policy.

Since the bills mature after 14 days, the funds are not permanently removed from the financial system. Instead, the operations temporarily lock up excess liquidity, with the money potentially returning to the system when the instruments mature.

The intervention could affect short-term money-market conditions, bank liquidity and funding costs as financial institutions adjust their balance sheets and manage their available liquidity.

MPC decision due next week
The latest liquidity operations come ahead of the Bank of Ghana's 132nd Monetary Policy Committee (MPC) meetings scheduled for September 22 to 24.

The committee is expected to announce its latest monetary policy decision on Thursday, September 24.

The central bank has previously identified liquidity management and sterilisation as important instruments for maintaining its desired monetary policy stance.

Its latest monetary policy report also points to sterilisation operations among the measures supporting the outlook for inflation.

Market attention will therefore be on developments in money-market rates and bank liquidity following the latest GH¢21.41 billion absorption as the MPC meeting approaches.