Ghana Reference Rate Falls to 17.86%

By Praisebell Rosemond Larbi

Ghana’s lending environment is undergoing one of its most dramatic shifts in recent years, with the Ghana Reference Rate (GRR) falling sharply to 17.86% in October 2025, its lowest level in more than two years. The decline represents a major turning point for businesses, households, and banks, marking the first meaningful return toward pre-crisis credit conditions as 2025 draws to a close.

From a rate that hovered near 29% in January, the GRR’s steady fall reflects the combined effect of easing Treasury bill yields, lower Monetary Policy Rates (MPR), and softer interbank rates. Collectively, these movements point to improving liquidity, easing financial pressures, and a banking sector gradually emerging from the era of exceptionally high interest rates.

A Year of Steady Decline

The year began with the GRR at 29.72% in January, rising slightly in February before beginning a sustained decline. By April, it had dropped to 23.99%, holding steady for two months before edging down further to 23.80% in June. The third quarter brought an even sharper drop as inflation slowed, fiscal consolidation gained traction, and short-term government securities began to reprice more aggressively.

By September, the GRR had plunged to 19.86%, paving the way for October’s decisive drop to 17.86%. For many analysts, this marks the closest Ghana has come to normalising borrowing conditions since the onset of recent economic turbulence.

The decline is already reshaping business sentiment. Banks are recalibrating loan books, small and medium-sized enterprises are reassessing expansion plans, and consumer credit, though still expensive by global standards is beginning to show signs of easing.

Treasury Bill Yields Drive the Downtrend

A key factor behind the GRR’s movement is the dramatic fall in short-term government securities. The 91-day Treasury bill rate, one of the core variables informing the GRR formula, dropped from 28.37% in January to 10.63% in October.

This sharp repricing reflects renewed investor confidence, reduced government reliance on high-cost domestic borrowing, and an improved macroeconomic environment. With short-term yields falling so significantly, the base cost of funds embedded in banks’ lending models has declined, accelerating the downward trajectory of the GRR.

Monetary Policy Easing Reinforces the Trend

The Bank of Ghana’s policy decisions also contributed meaningfully to the shift. After raising the Monetary Policy Rate from 27% to 28% in March, the central bank began a strong easing cycle as inflation moderated.

The MPR was cut to 25% in July, and further to 21.5% in September, marking one of the steepest monetary adjustments since the peak of the inflation crisis. Lower policy rates reduce the cost of credit, improve liquidity within the financial system, and compel banks to price loans more competitively, pressure that translated directly into the GRR’s consecutive monthly declines.

Interbank Rates Cool as Liquidity Improves

Interbank market behaviour further reinforced these gains. Overnight interbank rates, which hovered around 27% at the start of the year, softened to 21% by October. This easing indicates improved balance-sheet health across the sector and a more predictable macroeconomic climate, enabling banks to access cheaper funds and pass on the benefits through lending rates.

Relief for Borrowers, Pressure for Banks

The new GRR readings offer welcomed relief for manufacturers, traders, SMEs, and households that have endured prohibitively high borrowing costs. Working capital loans, trade facilities, and medium-term financing are gradually becoming more affordable.

For banks, however, the environment presents new challenges. Lower reference rates compress net interest margins, forcing institutions to strengthen risk management, improve operational efficiency, and compete more aggressively for high-quality borrowers.

Outlook

If inflation continues its downward path and fiscal consolidation holds, Ghana may be entering a new phase of interest-rate normalisation, one that supports recovery and growth rather than restraining it. Still, the sustainability of this trend will depend on disciplined government financing, stability in the treasury market, and continued enhancements in macroeconomic management.

For now, the GRR’s fall signals a hopeful shift: the cost of borrowing in Ghana is finally beginning to breathe again.