BoG plans Ghana Reference Rate reform to tackle high lending rates

The Bank of Ghana (BoG) has announced plans to reform the Ghana Reference Rate (GRR) as part of a broader strategy to reduce commercial lending rates to single digits over the next four years.

The announcement was made by the Governor of the central bank, Dr. Johnson Pandit Asiama, during the launch of the Ghanaian Banker Magazine and a set of new initiatives by the Chartered Institute of Bankers (CIB) in Accra.

According to Dr. Asiama, the GRR overhaul is a critical component of a wider structural reform agenda aimed at addressing inefficiencies in Ghana’s credit market that have led to persistently high borrowing costs.

The reform, he noted, is essential to unlocking private-sector-led growth and enhancing access to finance for businesses and households.

“There were skeptics when I recently declared my vision of seeing lending rates fall below 10 percent before the end of my four-year tenure. A dedicated committee is already working on the GRR reform,” he remarked.

Introduced in 2018, the Ghana Reference Rate serves as the benchmark for pricing loans by commercial banks.

Dr. Asiama explained that the reforms would address structural flaws in credit pricing, improve transparency in the lending process, and support the development of a more inclusive and competitive financial system.

The Bank believes that a restructured GRR, backed by stronger regulatory oversight and increased market discipline, will provide a more accurate reflection of risk and macroeconomic conditions—thereby enabling banks to price loans more competitively and fairly.

The Governor emphasized that reducing lending rates is not simply a policy aspiration but a necessary intervention to drive sustainable economic growth.

“We are dismantling inefficiencies that have stood in the way of businesses for far too long,” he said.

Introduced in 2018, the Ghana Reference Rate serves as the benchmark for pricing loans by commercial banks.

However, the rate has often been criticized for its limited responsiveness to reductions in inflation and adjustments to the central bank’s policy rate.

This, stakeholders say, has created a disconnection between monetary policy signals and lending behaviors within the banking sector.

The initiative has been welcomed by key players in the financial sector, particularly small and medium-sized enterprises (SMEs), who often cite prohibitively high interest rates as a major constraint to expansion and job creation.

Economist lauds gov’t’s smart economic policies driving recovery

By Praisebell Rosemond Larbi

Renowned economist and senior lecturer at the University of Ghana Business School, Professor Patrick Asuming, has commended the government for what he described as commendable handling of Ghana’s fiscal and monetary policies, which he says have contributed significantly to the country’s improving foreign reserves and economic stability.

Speaking in an interview with the media, Prof. Asuming said recent policy coordination between the Bank of Ghana and the Finance Ministry has yielded tangible improvements in macroeconomic indicators, citing signs of increased investor confidence and a more stable cedi.

“The improved reserve position and the return of some level of investor confidence are largely due to better coordination between fiscal and monetary authorities. We are seeing the early benefits of sustained fiscal discipline and currency stabilization efforts,” Prof. Asuming stated.

Prof. Asuming’s comments come at a time when there are early signs of economic recovery, with some businesses reporting improved access to capital and easing of cost pressures. Though cautious, he said the current trajectory is encouraging and should be supported by continued reforms.

He also emphasized the importance of building resilience to safeguard the gains made so far, especially as Ghana continues to navigate global uncertainties and domestic vulnerabilities.

“It’s important that we don’t lose momentum. The reforms must be sustained, and we must build buffers so that future shocks do not derail the economy,” he advised.

Recent data from the Bank of Ghana shows a stronger reserve position, buoyed by improved foreign exchange inflows, a slowdown in inflation, and tighter control over public spending. Analysts have also noted the role of government policies in restoring some level of market confidence, especially following Ghana’s domestic debt restructuring and IMF support program.

While challenges remain, particularly around debt sustainability and job creation, Prof. Asuming believes strategic policymaking can gradually return Ghana to a path of sustainable growth.

“We are not out of the woods yet, but we are heading in the right direction,” he added.