Ghana’s central bank says commercial banks need more time to pass on sharply falling interest rates to businesses, citing balance sheet adjustment and elevated risk pricing as key reasons for the delay.
Speaking at the Bank of Ghana’s 130th Monetary Policy Committee (MPC) briefing, the Governor acknowledged a visible disconnect between the rapid improvement in headline financial conditions and the pace at which firms are actually feeling relief in borrowing costs.
The scale of the rate shift over the past year has been significant. The 91-day Treasury bill rate fell to 4.9 percent in April 2026 from 15.5 percent a year earlier, while the Ghana Reference Rate (GRR) dropped to 10.06 percent from 23.99 percent. Average lending rates eased to 16.3 percent from 27.4 percent over the same period. Inflation remained subdued at 3.4 percent in April 2026, with core inflation trending lower.
Despite those improvements, the cost of credit at the firm level has not adjusted at the same pace, and the Governor made clear that expectation needs tempering.
“When the interest rates are falling, it may take a while,” the Governor said, adding that the current low-rate environment is still relatively new to banks.
The explanation rests on two structural realities. First, commercial banks require time to reprice their asset portfolios, recalibrate risk models, and shift their loan books — processes that do not respond immediately to monetary policy signals. Second, even where liquidity has improved, the pool of bankable projects that meet commercial credit standards remains limited, constraining how aggressively banks can lend.
Private sector credit has expanded 28.7 percent in nominal terms in April 2026, up from 19.9 percent the year before, but the central bank noted that lending growth reflects selective risk exposure rather than broad-based easing.
To support faster transmission over time, the Bank of Ghana is implementing liquidity management reforms, including a reduction of the cash reserve ratio to a uniform 20 percent effective June 2026.
The central bank’s position is that the direction is clear and the fundamentals are improving, but the banking system is still recalibrating to a pricing environment it has not operated in for several years. For businesses waiting on cheaper credit, that recalibration is the gap still standing between policy progress and commercial reality.
