Bank of Ghana Holds Policy Rate at 14% Amid Improving Inflation and Shifting Debt Metrics

The Monetary Policy Committee (MPC) of the Bank of Ghana has maintained the Monetary Policy Rate at 14.0% following its 130th meeting in May 2026. This decision reflects a strategic balance between significant domestic gains and lingering external risks. Governor Dr. Johnson Asiama highlighted a robust recovery in the domestic economy, underscored by a 12.6% year-on-year growth in the Composite Index of Economic Activity (CIEA) for March 2026. While consumer inflation has plummeted to 3.4% from 18.4% the previous year, the central bank remains cautious due to external uncertainties, particularly geopolitical tensions in the Middle East which threaten global commodity prices and oil stability.

Ghana's fiscal position showed a complex evolution as the total public debt reached GH"674.1 billion (US$63.1 billion) by the first quarter of 2026. Although the nominal debt stock increased, the debt-to-GDP ratio actually fell to 42.2%, down from 44.7% in late 2025, benefiting from a rebased nominal GDP estimate. This improvement occurred despite the Ghana cedi depreciating by 8.4% against the US dollar within the first five months of the year, falling to an average mid-rate of GH"11.41. To buffer against these currency pressures, the central bank has focused on reserve accumulation rather than market intervention, with Gross International Reserves rising to US$14.42 billion, equivalent to six months of import cover.

In the banking sector, borrowing costs have seen a notable decline, with the average lending rate dropping sharply to 16.33% in April from over 20.5% in January. Despite this downward trend, Dr. Sajid Chaudhry, an economist at Aston University, warned that the impact on economic growth will remain limited unless commercial banks accelerate the transmission of policy rate cuts to their customers. To further stabilize the financial landscape, the Bank of Ghana is enforcing a 20% cash reserve ratio for domestic currency effective June 4, 2026, and expects a decline in non-performing loans as new regulatory and supervisory guidelines take hold.

Looking ahead, the central bank continues to modernize Ghana's financial infrastructure through the ongoing eCedi project, which remains focused on enhancing cross-border payments and regional trade. While producer price inflation saw a slight uptick to 2.7% in April due to mining sector costs, the overall macroeconomic outlook remains positive. The government aims to keep the debt-to-GDP ratio below a 55% threshold, focusing on maturity extensions and risk reduction to ensure long-term sustainability as the country navigates the completion of its three-year IMF program.