Policy Rate Cut to Ease Borrowing Costs – Economic Analyst
By: Solomon Nartey Tetteh
Economic Analyst Emmanuel Boateng has reassured investors and the public that Ghana’s currency is likely to remain stable despite recent cuts in the Bank of Ghana’s policy rate. Speaking on Business Breakfast on Zed 101.9FM, Mr. Boateng highlighted that structural improvements in the economy provide a strong foundation for resilience.
Mr. Boateng acknowledged concerns that lower interest rates could reduce the appeal of Ghana for foreign investors, potentially putting pressure on the cedi. “The theory is valid, lower rates can reduce foreign investment appeal,” he said. However, he stressed that Ghana’s current interest rate of 18% remains attractive compared to global rates.
Beyond interest rates, he pointed to structural reforms as key factors supporting currency stability. These include fiscal discipline and a significant reduction in debt levels, with Ghana’s debt-to-GDP ratio dropping from 61.8% to about 45%.
“Investors do not only look at policy rates,” he explained.
“We previously had policy rates of 27 to 30%, but high inflation and a heavy debt stock deterred investors. Returns alone are not enough, investors assess the risk-return balance before committing capital,” he stressed.
Mr. Boateng emphasized that rational investors seek assets that offer an optimal level of satisfaction and return relative to risk, and that Ghana’s improved macroeconomic fundamentals make the country attractive despite lower rates.
He noted that the early months of 2026 will be critical in observing any potential outflows from portfolio investments.
The analyst also said the Bank of Ghana’s latest cut in the Monetary Policy Rate (MPR) will bring tangible relief to businesses and households through reduced borrowing costs.
Mr. Boateng explained that a cut in the policy rate immediately influences the Ghana Reference Rate (GRR), the benchmark used by banks to set lending rates. According to him, the decline in the GRR will translate into cheaper credit across the financial sector.
“The immediate impact is that the cost of capital is going to be cheaper. Prices of loans that is the interest rate charged will generally fall,” he noted.
He stated that businesses that rely on bank loans, especially manufacturers and traders, should expect their interest expenses to decline.
Mr. Boateng further stressed that households will also benefit from the policy shift. Personal loan rates are expected to ease, making consumer purchases and home ownership more affordable.
He added that the rate cut will help make borrowing more accessible across the economy.
The analyst emphasized that the policy decision is expected to stimulate business activity, ease financial pressures, and support broader economic growth.
