The rise in printing costs is concerning for the Bank of Ghana (BoG). The bank must balance providing liquidity and maintaining fiscal stability. Despite efforts to digitize finances, cash remains crucial. This is especially true in the informal sector, which relies heavily on cash.
Analysts link increased currency printing expenses to several factors. There is a heightened demand for physical cash amid economic uncertainty and rising inflation. BoG’s 2024 macroeconomic summary shows a 70.5 percent increase in currency outside banks. It rose from GH¢37.6 billion in December 2023 to GH¢64.1 billion by December 2024.
This surge coincides with a 38.2 percent increase in narrow money (M1). M1 includes currency outside banks and demand deposits. Economists say this cash demand reflects inflationary pressures and a preference for liquidity during volatility.
The cost of printing cedi notes aligns with broader monetary policy trends. Reserve money, including currency in circulation and bank deposits with BoG, grew by 47.8 percent year-on-year. It reached GH¢130.5 billion by December 2024 due to a new cash reserve ratio policy.
Broad money (M2) also increased by 33.7 percent, rising from GH¢185.4 billion to GH¢247.8 billion between December 2023 and 2024. However, the growth in currency holdings outpaced other monetary aggregates, indicating a shift toward cash preference.
This rapid increase in cash demand reflects wider macroeconomic trends amid inflationary pressures. BoG’s higher currency printing costs come as it faces negative equity issues. As of December 2024, BoG’s equity was negative GH¢61.32 billion due to impairments from the Domestic Debt Exchange Programme.
While rising printing costs do not directly impact profitability, they are significant operational expenses for BoG. The bank’s mandate includes ensuring an adequate supply of high-quality banknotes nationwide, crucial for a cash-based economy.
As Ghana moves towards a digital economy with the e-Cedi development, physical cash demand may gradually change over time.
