Dr. Boako Warns: GH¢62 Billion Sterilized by Bank of Ghana Cripples Family Spending – Economic Impact Explained

Introduction

In a pointed critique during the 2025 Budget debate, Dr. Gideon Boako, Member of Parliament for Tano North, highlighted the unintended consequences of Ghana’s inflation control strategy. He argued that the Bank of Ghana (BoG) sterilized GH¢62 billion in liquidity through open market operations (OMOs) and foreign exchange auctions in 2024. This move, aimed at achieving single-digit inflation, has reportedly drained money from ordinary Ghanaians’ pockets, severely impacting family spending.

Dr. Boako’s warning underscores a key tension in monetary policy: balancing inflation reduction with economic vitality. As families face reduced disposable income, markets suffer despite abundant supply, a scenario vividly described during the Christmas season. This article breaks down the Bank of Ghana sterilization process, its effects on household budgets, and Dr. Boako’s call for liquidity release.

Analysis

The core of Dr. Boako’s concern revolves around liquidity sterilization by the Bank of Ghana, a standard monetary tool used to manage excess money supply and curb inflation. In 2024, BoG absorbed GH¢62 billion via OMOs—where the central bank sells government securities to banks, reducing circulating cash—and forex interventions, swapping local currency for foreign reserves.

What is Liquidity Sterilization?

Liquidity sterilization involves the central bank removing excess money from the economy to prevent inflationary pressures. When commercial banks hold more reserves than needed, they lend freely, boosting spending and prices. BoG’s actions in 2024 countered this by “sterilizing” funds, effectively parking GH¢62 billion away from public use. Dr. Boako contends this directly hit average Ghanaians, as the money “should have been available in the pockets of Ghanaians to spend this year.”

Inflation Control vs. Economic Growth

Ghana targeted single-digit inflation through aggressive sterilization and fiscal consolidation—cutting government spending and raising revenues. Dr. Boako challenged this, stating, “I dare say that without them we were still going to achieve the same results anyway.” Fiscal data supports the scale: GH¢62 billion sterilized, tying up liquidity that could fuel consumption. Pedagogically, this illustrates the trade-off in tight monetary policy: lower inflation (a success) but squeezed family spending (a cost).

Market and Seasonal Impacts

Dr. Boako painted a stark picture: traders sitting idle in the sun, potential buyers window-shopping without purchasing, even amid a food glut and sufficient goods supply. He questioned why items with high income elasticity of demand—goods sensitive to spending power—remained unsold. Low disposable income, he argued, explains this paradox, crippling retail and family budgets during peak seasons like Christmas.

Summary

Dr. Gideon Boako’s intervention in the 2025 Budget debate exposed the downside of BoG’s GH¢62 billion sterilization in 2024. While securing single-digit inflation, it siphoned liquidity from households, leading to subdued family spending and stagnant markets despite ample supply. He urged swift liquidity injection to revive economic activity, emphasizing that tight policy has real human costs.

Key Points

Practical Advice

For policymakers and economists navigating Bank of Ghana liquidity sterilization, Dr. Boako’s views offer actionable insights. Here’s pedagogical guidance grounded in his statements:

For Government and BoG Officials

Prioritize gradual liquidity release. Instead of prolonged sterilization, consider phased re-injection via targeted OMOs or reserve requirement adjustments. Monitor household spending indicators like retail sales data to gauge impacts. Balance sterilization with fiscal stimuli, such as subsidies for essentials, to protect vulnerable families.

For Businesses and Traders

Adapt to low-spending environments by diversifying products toward necessities with inelastic demand. Offer flexible payment plans or promotions to stimulate purchases. Track BoG announcements on policy easing for timely inventory adjustments.

For Households

Build emergency savings and prioritize budgeting amid tight liquidity. Focus spending on high-utility goods, leveraging markets with gluts for bargains. Stay informed on monetary policy shifts via official BoG reports.

Points of Caution

Dr. Boako’s warning highlights risks in aggressive monetary tightening:

• Recession Risk: Prolonged GH¢62 billion sterilization could slow GDP growth by curbing consumption, a key driver in Ghana’s economy.
• Inequality Amplification: Low-income families suffer most from reduced disposable income, widening gaps.
• Market Distortions: Unsold gluts waste resources; perishable foods like produce exacerbate losses.
• Policy Overreliance: Excessive focus on sterilization ignores structural issues like supply chain inefficiencies.
• Timing Sensitivity: Holiday seasons amplify spending shortfalls, testing social stability.

Comparison

Comparing BoG’s 2024 sterilization to past strategies reveals patterns. In 2022, amid high inflation, BoG sterilized smaller amounts via OMOs, paired with rate hikes, achieving stabilization without such stark family spending complaints. The 2024 GH¢62 billion scale—larger due to forex pressures—marks escalation.

Sterilization vs. Alternatives

Unlike sterilization’s direct liquidity drain, rate hikes indirectly cool demand. Dr. Boako implies a mix might have avoided extreme family spending curbs.

Legal Implications

No direct legal violations arise from BoG’s sterilization, as it falls under the Bank of Ghana Act (Act 612, 2002), granting authority for OMOs and forex management to maintain price stability. Dr. Boako’s critique is policy-oriented, not challenging legality. Parliamentary debates like the 2025 Budget session provide oversight without imposing legal constraints.

Conclusion

Dr. Gideon Boako’s alert on the Bank of Ghana’s GH¢62 billion sterilization illuminates the double-edged sword of inflation control in Ghana. Achieving single-digit rates is commendable, yet the cost to family spending and markets demands recalibration. Releasing liquidity swiftly, as urged, could restore balance, ensuring policy serves people. This debate fosters healthier monetary strategy, prioritizing sustainable growth over short-term wins.

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