A Monetary Economist Dr. Dennis Nsafoah, says he disagrees with critics of the Bank of Ghana over the injection of $US10 billion in the Ghanaian economy to stabilise the cedi.
In recent weeks, the Bank of Ghana has faced criticism for “pumping US$10 billion” into the economy to stabilise the exchange rate. Critics argue that such actions are inefficient, unsustainable, and a misuse of scarce foreign reserves.
Dr. Nsafoah, however, said he respectfully disagrees.
First, he pointed out that this is exactly what monetary policy tools are designed to do. “In the long run, monetary policy cannot raise real output, but it can stabilise prices and the exchange rate”.
That stability, he alluded, is not an end in itself, but rather it is the foundation upon which fiscal policy, investment, and structural reforms can operate effectively.
Second, he noted that the claim that the effects of such interventions are necessarily temporary misunderstands the mechanics of exchange rate intervention.
“If dollar sales are accompanied by the reinjection of cedis through domestic asset purchases what (economists call sterilized intervention) then the exchange rate effects will indeed be short-lived. But the data from 2025 suggest the opposite”, Dr. Nsafoah who is an Assistant Professor of Economics at Niagara University, New York, mentioned.
He argued that the Bank of Ghana did not re-expand liquidity following its forex operations. Instead, the total money in circulation declined, compressing excess demand for foreign currency.
“This is unsterilized exchange rate intervention, and both theory and evidence show that it can have lasting effects on the exchange rate”, he stressed.
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