Minority cautions BoG against GHC60bn sterilization policy

The Minority in Parliament has condemned the Bank of Ghana’s sterilization policy as counterproductive, arguing that it hinders economic growth. They are calling for alternative measures that can control inflation while boosting productivity and investment.

Kojo Oppong Nkrumah, Ranking Member on the Economy and Development Committee and MP for Ofoase-Ayirebi, revealed that the Central Bank has withdrawn over GHS60 billion from the economy since January, citing excess liquidity as the reason.

“From January till now, the central bank has admitted to us that they have mopped up over 60 billion Ghana cedis from the Ghanaian economy. When that money is packed at the Bank of Ghana, it is not available for demand, and so prices won’t rise that quickly. But this is one of the artificial ways of controlling inflation,” he explained.

The MP argued that while sterilization is intended to reduce inflation by limiting the money supply, its large scale has unintended consequences on productivity, job creation, and private-sector activity. He noted that the withdrawn funds amount to nearly half of the Ghana Stock Exchange’s market capitalization, currently just over GHS130 billion.

“If you sterilize 62 billion and compare it to our total stock market capitalization, you will see the scale of the problem. We cannot just continue packing liquidity at the central bank while businesses starve of capital,” Oppong Nkrumah said.

Instead, he proposed that a portion of the sterilized funds be channeled into more productive initiatives, such as the Venture Capital Trust Fund, which was established under President Kufuor to provide equity financing to startups and small businesses without the burden of interest payments.

“Young people with great business ideas could have access to this equity capital. If these funds go into the Venture Capital Trust Fund, they can be deployed to help entrepreneurs expand their operations, create jobs, and grow the economy. That is far more beneficial than simply sterilizing liquidity,” he stressed.

He also recommended directing some of the money into the stock market to provide zero-coupon equity financing for established businesses, enabling them to expand production and generate employment opportunities.

Oppong Nkrumah cautioned that sterilization alone only offers a temporary solution. “Eventually, when you release that money back into the economy, inflation will pick up again. So this old economic orthodoxy of just sterilizing money and packing it at the Bank of Ghana is not sustainable. What we need is a broader and better strategy that supports growth while managing inflation,” he said.

He concluded by urging policymakers to explore innovative approaches that balance effective inflation control with long-term economic development.