An overview of the effects of monetary policy in Ghana on GDP and inflation, from 1981 to the present day.

% annual growth rate:

  M2 Nominal GDP
1981-2022 34.95% 30.81%
1981-1990 43.02% 48.57%
1991-2000 40.10% 29.48%
2001-2010 33.77% 25.97%
2011-2020 24.55% 20.40%

Sources: M2 from Bank of Ghana and nominal GDP from IMF database, as at September 2023

The medium-term relationship between money and nominal GDP growth in Ghana, 1981-2022

Five-year moving averages of annual % changes, with 1983 being the start of the first five-year period

Comment on monetary trends in Ghana

In 1957, the former British colony of Gold Coast became the first sub-Saharan African country to gain independence from its colonial ruler, changing its name to Ghana. Its early years as a sovereign nation were turbulent, but since multi-party democracy was enshrined in a new constitution in 1992, the country has enjoyed a considerable degree of political stability.

Economically, Ghana is rich in resources. As may be inferred form its former name, it is a substantial producer of gold. It also boasts an ideal climate for the production of cocoa. Mining and oil are also important components of the Ghanaian economy, which has been one of the fastest growing in the world.

The Bank of Ghana, the country's central bank, was inaugurated in 1957. Its mandate includes the implementation of monetary policy to achieve price stability (the current inflation target is 8%.) The Bank is independent of the government, with its independence being enshrined in all relevant legislation since 1992. The country initially used the Ghanaian pound as its currency but switched to the Cedi in 1965. For a while, the Cedi was pegged to Sterling but was allowed to float in 1978. The resultant high inflation resulted in the currency being re-pegged, this time to the US dollar. Price controls were brought in because inflation remained a problem. Indeed, inflation has been a persistent problem for Ghana throughout its history, touching 60% in 2001 and remaining above 10% for much of the last decade. Interest rates have been high by international standards in an attempt to curb money growth and thus bring inflation down. The years 2017 and 2018 saw the annual rate of money growth drop to just over 15%, which has been much lower than average for the country.

Ghana is regarded as one of the more successful and prosperous countries in Africa. However, it has needed to approach the IMF for help on a number of occasions, borrowing US$918 million as recently as 2015 to help stabilise the economy. In 2019, with IMF help. the budget deficit was reduced and inflation dropped below 10%. Even so, in 2020 when developed economies were slashing interest rates to near zero to combat the Coronavirus epidemic, Ghana's base rates have stayed well above 10% in order to cool money growth and the resultant inflation.