he official justification for the Bank of Ghana’s announcement on November 26, 2025, that it is going back to using the 14-day bill as its main tool for Open Market Operations (OMO) is to “strengthen liquidity management and improve policy transmission.”
However, the underlying data from the BoG Summary of Economic and Financial Data (Nov 2025) shows that this is a direct reaction to a developing liquidity crisis within the financial system rather than a standard policy improvement.
The timing of the 14-day bill’s reintroduction and the peculiar behaviour of important liquidity indicators demonstrate that the central bank is taking action to stabilise a system that is under stress.
By adding or removing money through the buying or selling of securities, open market operations have an impact on liquidity conditions. The 14-day bill is one example of a short-tenor instrument that is only used when liquidity becomes dangerously tight, erratic, or volatile.
This is exactly what is happening in the financial sector of Ghana. Reserve Money (RM), the cornerstone of the banking system’s liquidity, dropped sharply from GH¢144.9 billion in April 2025 to GH¢112.5 billion in September 2025, a 22% decrease, according to the BoG data.
A significant squeeze in the cash and reserve balances that banks depend on to make payments and grant credit is indicated by such a sharp decline, which surpasses typical seasonal fluctuations.
The collapse in bank reserves, which fell by nearly 40% from GH¢74.2 billion in April to GH¢44.6 billion by September 2025, further exposes the crisis. Banks are forced to ration lending and hoard cash when they lose this much reserves because the interbank market becomes less liquid.
Deteriorating liquidity ratios support this behaviour: Core Liquid Assets to Total Assets decreased from 36.6% in April to 27.7% in October, while Core Liquid Assets to Short-Term Liabilities decreased from 44.0% to 33.8% during the same time frame. These are important measures of financial stability, and declines of this kind indicate a genuine decline in banks’ capacity to fulfill short-term obligations.
This interpretation is supported by the interbank market’s volatility.
From 27.02% in June to 22.76% in July, interbank weighted average rates fluctuated before settling at 21% in October. This degree of volatility suggests that bank-to-bank liquidity was no longer moving smoothly.
Interbank rates typically stay in a small range around the policy rate; however, their recent behaviour indicates market fragmentation, uncertainty, and shallowness. The overall state of liquidity is also under stress.
The sharp decline in foreign currency deposits from GH¢82 billion in December 2024 to GH¢58.3 billion in May 2025 reduced banks’ liquidity buffers.
From GH¢341.7 billion in April to GH¢326.0 billion in May, M2+, the economy’s broad liquidity aggregate, stagnated and even decreased, indicating a tightening of liquidity across households and businesses. Additionally, real private sector credit shrank, which is a common indicator that banks are short on cash.
When combined, these signs unequivocally indicate a squeeze on liquidity. The fact that the financial system is experiencing liquidity shortages rather than surpluses is concealed by the governor’s claim that the 14-day bill will aid in absorbing excess liquidity.
The BoG is attempting to stabilise short-term liquidity conditions, anchor interbank rates, and stop further tightening that could jeopardise financial stability, as evidenced by the reactivation of the 14-day bill and the concurrent reduction in the Monetary Policy Rate from 21.5% to 18%.
In short, the data clearly shows that the Bank of Ghana’s return to the 14-day bill is a necessary reaction to an already-occurring liquidity crisis rather than a proactive improvement of policy tools.
This change is justified by the contraction of reserve money, collapsing bank reserves, declining deposits, weakening liquidity ratios, and interbank volatility. Therefore, it is best to interpret the action as an emergency fine-tuning measure intended to regain control over liquidity dynamics in a banking environment that is becoming more and more precarious.
Written by Prof. Isaac Boadi – Dean, Faculty of Accounting and Finance, UPSA & Executive Director, Institute of Economic and Research Policy
