Ghana’s real interest rate has reached about 10.6 percentage points, among the widest globally, squeezing private credit even as the Bank of Ghana (BoG) holds its rate steady.
The central bank held its policy rate at 14 percent at its 130th Monetary Policy Committee (MPC) meeting on 20 May, while inflation stood at 3.4 percent in April, its first uptick after 15 months of decline. The gap between the two, the real interest rate, sits near 10.6 points, which economists say is unusually wide for an economy that is not fighting a high inflation crisis.
By comparison, the analysis puts South Africa’s real rate at about 2.75 points, Kenya’s at roughly 3.15 and Tanzania’s at about 1.75. Nigeria’s gap is wider in nominal terms but reflects deliberate tightening against double digit inflation, while real rates in the United States and the eurozone are close to neutral.
The anomaly stems less from aggressive tightening than from disinflation outrunning the cutting cycle. The BoG made five straight cuts, lowering the rate from 29 percent to 14 percent, but inflation fell faster, from a peak of about 54 percent in late 2022 to 3.4 percent in April 2026. The effective squeeze tightened even as the nominal rate fell.
Governor Dr. Johnson Pandit Asiama said the committee held because of external risks, including the Middle East conflict and disruptions around the Strait of Hormuz, higher global energy and food prices, a weaker cedi, and the International Monetary Fund’s (IMF) cut to its 2026 global growth forecast from 3.3 to 3.1 percent. The cedi has fallen about 8.4 percent against the dollar since early May.
The strength of the recovery, with economic activity up 12.6 percent year on year in March, has not produced affordable credit. Commercial lending rates remain above 20 percent at most banks, well over the policy rate. Private sector credit has rebounded, growing 24.5 percent in real terms in April, but banks have shifted heavily into short term Treasury bills and have been slow to pass lower yields to borrowers. Dr. Daniel Osabutey, a senior lecturer at Accra Technical University, said spreads beyond 17 or 18 percent are hard to justify and that “the transmission mechanism is not working as it should.”
For small businesses without other financing, a working capital loan priced near 24 percent against 3.4 percent inflation amounts to a distress level borrowing cost. Asiama himself questioned whether current conditions are effective in shaping lending, and the MPC announced no pricing remedy beyond a cash reserve ratio change aimed at reserve management.
Reserves stood at $14.4 billion in mid May, about 5.7 months of import cover. The next MPC meeting is set for 22 July, and Osabutey said the case for a further cut would be hard to resist if the next inflation reading shows April’s rise was temporary, though he did not rule out an increase to 15 or 16 percent should external pressures persist.
