News Guide Africa

Tag: Ghana Reference Rate (GRR)

  • Ghana Reference Rate hits 10% as banks pivot to real economy

    Ghana Reference Rate hits 10% as banks pivot to real economy

    By Adnan Adams Mohammed

    Ghana’s financial landscape is undergoing a radical transformation as the Ghana Reference Rate (GRR) plummeted to a historic low of 10.06% as at last week.

    The drop, fueled by consistent disinflation and aggressive monetary easing, has signaled the beginning of a “cheap credit” era, forcing banks to abandon their reliance on government securities and look toward the private sector.

    For years, Ghanaian businesses have complained of “crowding out,” where banks preferred the safety of high-interest Treasury bills over the perceived risks of lending to local entrepreneurs. However, with Treasury returns now falling in tandem with the GRR, that dynamic is shifting.

    The great pivot to the private sector

    Farihan Alhassan, a prominent banking executive, has noted that the era of “easy money” from government paper is fading. As yields on Treasury bills lose their luster, financial institutions are being pushed to deploy their liquidity into the real economy.

    “The low-interest environment is effectively forcing banks to go back to their core mandate: lending,” Alhassan stated. “We are seeing a strategic shift where credit is finally flowing into manufacturing, agriculture, and SMEs. The focus has moved from government desks to the shop floors of Ghanaian businesses.”

    Relief for borrowers, risks for lenders

    The drop to 10.06% is expected to trigger an immediate reduction in the cost of existing floating-rate loans, providing much-needed breathing room for debt-burdened companies and households. Analysts predict that if inflation continues its downward trend, the GRR could hit single digits by the end of the year.

    However, this transition is not without its detractors. While the prospect of affordable credit is being celebrated by the business community, some industry veterans are sounding the alarm on the potential for “costly consequences.”

    The “subprime” warning

    In a stark counter-narrative, the Managing Director of GCB Bank, Kofi Adomakoh, has warned that the rush to lend in a low-interest era could lead to a subprime lending crisis. The concern is that in the desperate search for yield, banks might lower their credit standards and lend to over-leveraged or unviable businesses.

    “Cheap credit is a double-edged sword,” the GCB MD cautioned. “While it fuels growth, it also creates an environment where risk can be mispriced. If we are not careful, the ‘low-interest era’ could seed the next crop of non-performing loans (NPLs) if credit is extended without rigorous due diligence.”

    A new economic chapter

    Despite the warnings, the prevailing sentiment on the streets of Accra is one of cautious optimism. For the first time in a decade, the dream of affordable capital for Ghanaian-owned industries seems within reach.

    The Bank of Ghana is expected to monitor the situation closely, balancing the need for economic stimulation with the stability of the banking sector. For now, the message to the private sector is clear: the vaults are opening, but the scrutiny will be tighter than ever.

    Key market movements:

    Ghana Reference Rate (GRR): 10.06% (Down from 12.5% in Q1).

    Forecast: Further cuts expected as inflation stabilizes.

    Banking Trend: Increased allocation to private sector credit portfolios.

     

     

  • Bank lending rates fall in response to latest BoG benchmark interest rate cut

    Bank lending rates fall in response to latest BoG benchmark interest rate cut

    By Toma Imirhe

    Following the latest cut by the Bank of Ghana’s Monetary Policy Committee (MPC) to its benchmark Monetary Policy Rate (MPR) which it trimmed it by 250 basis points to 15.50% at its late-January 2026 meeting Ghana’s commercial banking sector has begun to adjust its deposit and lending rate structures amid evolving credit conditions. The MPR cut, the first major policy action of 2026, reflects a broader easing cycle that has seen multiple reductions since mid-2025 and is intended to support economic recovery while preserving price stability.

    Responding to the fall in benchmark rates, Ghana’s commercial lenders have begun adjusting their interest rate schedules, particularly for variable-rate loan customers:

    According to industry sources, many commercial banks have started trimming interest rates on both existing and new loan facilities in line with the decline in the Ghana Reference Rate, notably since early January. These adjustments have largely affected borrowers on variable interest rate contracts, where repayment terms automatically realign with benchmark movements.

    The Ghana Association of Banks (GAB) has noted that the transmission of reference rate cuts into commercial lending rates is progressing across most lenders, even as critics warn that the pace of transmission still needs to accelerate to offer tangible cost relief to businesses.

    On the deposit side, while comprehensive data for 2026 remains limited, financial market observers report deposit rate cuts have remained relatively low compared with the declines in lending yields. This suggests banks are balancing a narrowing interest margin with competitive needs for deposit mobilization, especially in a softer monetary environment.

    Although specific banks have not publicly detailed broad, sector-wide lending rate cut announcements, analysts assert that larger lenders such as GCB Bank Limited, Ecobank Ghana, Absa Bank Ghana Limited and Stanbic Bank Ghana Limited historically among those with competitive lending portfolios are likely adjusting their loan pricing across products to mirror the lowered Ghana Reference Rate (GRR) and the MPR.

    The GRR, which is effectively the base lending rate used by commercial banks to price most loans and influenced by the MPR, interbank and government securities yields, has fallen modestly to 14.58% in early February 2026 from 15.68% in January.

    Treasury bill rates, which feed into the GRR calculation, have also declined following the policy adjustment. In the first week of February, yields on 91-day, 182-day and 364-day bills slid to roughly 9.97%, 11.82% and 12.06%, respectively, down from levels reported during late January auctions.

    Interbank rates the cost of overnight funds traded between banks have similarly eased, contributing to the lower GRR, although these remain well above the deposit rates, reflecting ongoing liquidity management in the banking system.

    Historical data from the Bank of Ghana also shows that average lending rates the headline price of credit across all maturities have steadily declined over the past year. By the end of 2025 these averaged just over 20%, down sharply from around 30% in early 2025.

    The MPR, a foundational anchor for money market interest rates in Ghana, started the easing cycle in 2025 from 28% during the first half of the year, to 25% in late July, before it moved down to 21.5%, September and then to 18% by late November, before this latest substantial reduction. This series of cuts increasingly improved liquidity conditions and assisted the downward momentum in key market rates.

    Looking ahead, market analysts largely expect the central bank to maintain an easing bias in coming MPC meetings, especially if inflation remains subdued within or near the medium-term target band and economic growth remains on track. This outlook suggests the possibility of further cuts or at least a sustained lower policy rate later in 2026, which would reinforce the downward trajectory for money market rates and promote cheaper credit availability.

    While challenges such as deposit rate rigidity and credit risk premiums persist, the policy pivot to a 15.50% MPR and ongoing transmission into commercial bank pricing signals meaningful progress in lowering borrowing costs for Ghana’s businesses a critical element for renewed investment and economic momentum in 2026.

    Consumer and corporate borrowers alike will be watching closely for both subsequent MPC decisions and more decisive rate adjustments from major lenders in the weeks ahead.

     

     

  • A High-Stakes Economic Dialogue: Otumfuo Demands Relief from “Crippling” Interest Rates as BoG Governor Pledges 10% Target by 2028

    A High-Stakes Economic Dialogue: Otumfuo Demands Relief from “Crippling” Interest Rates as BoG Governor Pledges 10% Target by 2028

    By Adnan Adams Mohammed

     

    The Bank of Ghana (BoG) is walking a tightrope between fostering economic recovery and guarding against inflationary risks.

    The delicate balance was the central point of discussion during a high-profile courtesy visit by the Asantehene, Otumfuo Osei Tutu II, to the central bank this week, where he issued a strong plea for immediate action to lower borrowing costs for Ghana’s private sector.

    The dialogue between the revered monarch and Governor Dr. Johnson Asiama highlighted the urgent need to translate recent macroeconomic gains into tangible support for businesses struggling under a high-interest-rate environment.

    The Asantehene’s Urgent Appeal

    While acknowledging recent marginal declines in lending costs, Otumfuo Osei Tutu II stressed that more aggressive action is necessary to spur domestic industry and job creation. He argued that government investment alone cannot guarantee a sound economy and that the onus is now on the private sector to drive growth.

    In a blunt appeal to the Governor, the Asantehene demanded a shift in policy focus:

    “Let me be as blunt as I can: no amount of investment by government can give us a sound economy. This moment calls for a private push to stimulate domestic industry.”

    He continued, urging the central bank to fundamentally change the nation’s credit landscape:

    “Move the economy from the crippling high interest rate regime to a level where it becomes a stimulant of business and job creation.”

    The message underscores a widely held view among the business community that high borrowing costs are a major impediment to the growth of Small and Medium-sized Enterprises (SMEs).

    Governor Asiama’s 10% Ambition

    Governor Dr. Asiama received the Asantehene’s call in stride, restating the central bank’s commitment to achieving a more affordable credit environment without jeopardizing the hard-won gains in price stability.

    Dr. Asiama pointed to positive indicators, including a historic high in gross international reserves (above $13.8 billion) and a general easing of money market yields. The 91-day Treasury bill rate, for instance, fell significantly from 13.4% in July to 10.3% in August 2025.

    He articulated an ambitious target for his tenure:

    “I have said on many occasions that my prayer and wish is that by the end of my four-year tenure, lending rates will not be more than 10 per cent.”

    The Delicate Balancing Act: A Warning from Deloitte

    The conversation about easing rates comes as the financial services firm Deloitte warns that the BoG must proceed with extreme caution. The central bank cut its policy rate by 10 percentage points in 2025, closing the year at 18% per annum, which has helped stabilize the cedi and curb inflation.

    Deloitte anticipates further cuts in the policy rate in 2026 but warns against excessive easing:

    “While these reductions are anticipated to alleviate financing constraints and stimulate credit and economic demand, excessive easing could risk reversing the progress made in controlling inflation.”

    Lending Rates Begin to Shift

    The immediate future, however, holds some promise for businesses. Data from the Ghana Association of Banks, effective January 7, 2026, shows a marginal drop in the Ghana Reference Rate (GRR) the benchmark used by commercial banks to price loans—from 15.9% in December 2025 to 15.68%.

    This minor decline, alongside recent BoG data showing average lending rates falling from 26.6% to 24.2%, indicates a gradual softening of credit conditions.

    As Ghana enters 2026, the BoG is caught between the private sector’s urgent need for affordable credit and the fiscal prudence required to maintain macroeconomic stability, making the trajectory of interest rates the key economic story of the year ahead.

     

     

     

     

  • IMF urges caution as BoG eyes further rate cuts

    IMF urges caution as BoG eyes further rate cuts

    The International Monetary Fund (IMF) has admonished the Bank of Ghana (BoG) to tread carefully on further easing of the policy rate, emphasizing the need for a data-driven approach.

    “With inflation pressures subsiding and the recent appreciation of the Cedi, the Bank of Ghana has appropriately begun a cautious monetary easing cycle. Any further easing should remain gradual and data-dependent,” the IMF said in its Staff Review of Ghana’s Bailout Programme.

    Since January 2025, the BoG has cut the policy rate by 9 percentage points to 18%, aiming to spur economic growth. BoG Governor Dr. Johnson Asiama remains committed to pushing lending rates down to 10% by the end of his tenure, believing it’s crucial for unlocking private-sector growth.

    “We are doing everything we can to make sure we achieve it,” Dr. Asiama said, noting that average lending rates have fallen from 32% to 21% within the year. The Ghana Reference Rate (GRR) has also dropped from 29.72% in January to 17.86% in October 2025, signalling improved liquidity.

    However, the IMF warns that further easing should be gradual, citing the need to balance promoting economic growth with curbing inflation pressures.

    “Lower rates mean stronger businesses, more jobs, and faster economic growth,” Dr. Asiama said, emphasizing the importance of reducing credit costs for Ghana’s economic recovery.

    Addressing journalists after the 127th Monetary Policy Committee (MPC) meeting, Dr. Asiama acknowledged that the cost of borrowing remains high, but recent data shows “undeniable progress” with average lending rates falling sharply from about 32 percent to 21 percent within the year.

    “I’ve said before that I want to see average lending rates at 10% by the end of my tenure and I still stand by that. We are doing everything we can to make sure we achieve it,” he said.

    Describing the current average lending rate of 21–22 percent as progress, he however noted that more needs to be done to bring it lower for an economy seeking faster private-sector growth.

    “It may not be exactly what we intended by this time, but a lot of progress has been made,” he noted.

    He added that as Treasury bill yields continue to fall, commercial banks will be forced to lend more aggressively, paving the way for even sharper declines in lending rates.

    Latest figures from the Bank of Ghana’s November 2025 Summary of Economic and Financial Data confirm that the average lending rate dropped to 22.22 percent in October, down from 30.07 percent in January — a decline of more than 7 percentage points.

    The month-by-month data underscores the steady improvement:

    • 30.12% in February

    • 29.18% in March

    • 27.40% in April

    • 26.90% in May

    • Slight rise to 27.00% in June

    • Continuous declines afterward

    Despite the broad decline, the Governor noted stark variations in the cost of credit. While some banks price loans around the GRR, others charge as high as 39 percent, depending on borrower risk profiles.

    Meanwhile, in collaboration with the Fund, BoG has developed and implemented a new structured foreign exchange operations framework to intermediate FX flows and smooth excessive market volatility, while accumulating international reserves.

    The Fund said “The authorities have taken decisive steps to safeguard financial stability, including by implementing the strategy to restructure and reform state-owned banks, closing gaps in the crisis management and resolution framework, and pursuing a multi-pronged approach to reduce non-performing loans”.

    The Bretton Woods institution further pointed out that the authorities have taken decisive steps to safeguard financial stability, including by implementing the strategy to restructure and reform state-owned banks, closing gaps in the crisis management and resolution framework, and pursuing a multi-pronged approach to reduce non-performing loans.

    It added that important progress has been made to strengthen Ghana’s governance and public sector efficiency in line with the recently published Governance Diagnostic Assessment report, highlighting, that efforts to improve transparency and oversight need to continue, particularly related to public disclosure requirements and management of State-Owned Enterprises in the gold, cocoa, and energy sectors.

    It stressed that ambitious structural reforms to help create an environment more conducive to private sector investment, and to enhance governance and transparency remain key to boosting the economy’s potential and underpinning sustainable job creation.

     

    By Adnan Adams Mohammed