Bank of Ghana Slashes Policy Rate to 14% as Economic Recovery Gains Momentum Amid Global Volatility

The Bank of Ghana’s Monetary Policy Committee (MPC) has reduced its benchmark policy rate by 150 basis points to 14 percent, marking the second consecutive cut in 2026. Governor Dr. Johnson Pandit Asiama announced the decision on March 18, 2026, citing a steady decline in inflationary pressures and a need to stimulate private sector credit and economic growth. The cut, which brings the rate down from 15.5 percent, is intended to lower borrowing costs for businesses and households, fostering a more conducive environment for investment. Despite the easing of monetary policy, the central bank remains vigilant regarding rising geopolitical tensions in the Middle East, which could impact global oil prices and supply chains.

Addressing concerns over external shocks, Governor Asiama assured the public that the Ghana cedi remains resilient despite the Middle East crisis. Improved macroeconomic fundamentals, including stronger foreign exchange inflows and a bolstered reserve position, are expected to mitigate excessive volatility. In the first quarter of 2026, the cedi recorded a 3.9 percent depreciation against the US dollar in the interbank market, trading at approximately GH¢10.87—a significant improvement from the GH¢15.53 recorded in March 2025. The Governor emphasized that the Bank of Ghana is prioritizing exchange rate stability through prudent liquidity management and strategic interventions as global market uncertainties persist.

In the banking sector, the average lending rate fell significantly to 19.7 percent in February 2026, down from over 30 percent a year earlier. This decline coincides with an improvement in the banking industry’s asset quality, as the Non-Performing Loan (NPL) ratio dropped to 18.7 percent from 22.6 percent in February 2025. However, the BoG noted a slight month-on-month uptick in NPLs from 17.9 percent in January, indicating that credit risk remains a primary concern. To address this, the Central Bank has set an ambitious target to reduce the NPL ratio to 10 percent by the end of 2026 through enhanced risk management and loan restructuring, supported by a banking sector that remains liquid and solvent.

Further strengthening Ghana’s financial footing, the central bank reported that gold holdings increased to 19.2 tonnes in February 2026 following a strategic portfolio rebalancing. Additionally, the government has initiated a recapitalization process for the Bank of Ghana, issuing a bond to restore the bank’s capital position following losses incurred during the Domestic Debt Exchange Programme (DDEP). This move, alongside the MPC’s recent rate cut, is designed to bolster the effectiveness of monetary policy and ensure long-term financial stability. As the government continues fiscal reforms, the BoG maintains a cautiously optimistic outlook, ready to adjust policies as global and domestic conditions evolve.