Ghana’s Ghana Reference Rate (GRR) has dropped to 15.9% in December, a significant 200 basis-point decline from November’s 17.93%.
This represents a 200 basis-point decline from the previous month. The decrease is driven by improvements in key indicators, including the Monetary Policy Rate, Treasury rates, and interbank market rates.
The recent Monetary Policy Committees decision to cut policy rate by a 350-basis-point to 18% played a major role in the GRR decline. Also, the slight fall in Treasury bill rates and easing interbank market rates contributed to the decrease.
The Ghana Reference Rate (GRR) is a key benchmark used by commercial banks to price loans. Effectively it serves as the base lending rate for all the commercial banks who then add a margin, the size of which is determined by the quantum of risk a borrower preasents.
Impact on Borrowing Costs:
Commercial banks are likely to adjust their lending rates downward starting from December. New loans contracted in December will be benchmarked on the new GRR, resulting in lower interest payments.
However, borrowers with fixed-rate loans won’t be affected, but those with variable-rate agreements may see small adjustments.
Economic Context:
The decline comes amid businesses struggling to access credit due to a liquidity squeeze.
Average lending rates have dropped from 26.6% to 24.2%, reflecting an easing credit environment.
The Bank of Ghana projects inflation to reach 4-6% by year-end, influencing the Monetary Policy Committee’s decision-making.
Future Outlook:
Consequently, almost half of the MPC members support a further policy rate cut in January 2026.
Already, the Centre for Policy Analysis projects the Monetary Policy Rate to drop to around 15% in 2026, signaling a crucial turning point in Ghana’s macroeconomic stabilization efforts.
By Adnan Adams Mohammed
