Bank of Ghana (BoG) Governor Dr Johnson Asiama has said that the simultaneous improvement across every major economic indicator tracked over the past 13 months is evidence of properly coordinated monetary and fiscal policy, owing to their interconnectedness.

The Governor was speaking at a Fireside Chat hosted by the Ghana Export-Import Bank (Ghana EXIM). Responding to the moderator, Bernard Avle, who asked: “Am I to take it that your main objective is to bring all the rates down? It is like you have scissors, so your job is to cut; everything must come down?” the Governor said: “They are all interconnected. When you influence one, it reflects in all the other rates.”

There have been positive developments across headline inflation, the Monetary Policy Rate (MPR), the Ghana Reference Rate (GRR), average bank lending rates, the exchange rate, and gross international reserves. Comparing the metrics between February 2025 and 2026, headline inflation fell from 23.1 percent to 3.3 percent in 12 months, a reduction of 19.8 percentage points.

The benchmark MPR has been reduced from 27 percent to 14 percent, a cut of 1,300 basis points. The GRR also fell from 29 percent to 14 percent, a reduction of 1,500 basis points. Average bank lending rates declined from 30.12 percent to 19.7 percent, a fall of 10.4 percentage points. The cedi strengthened against the dollar, with the US$ selling rate moving from GH¢15.3 to GH¢10.95. Gross international reserves rose from US$8.9 billion to US$13.8 billion.

In the years preceding the 2022 fiscal and debt crisis, the country experienced precisely the opposite pattern. Inflation rose while the exchange rate deteriorated, reserves fell while lending rates remained prohibitively high, and the banking sector accumulated non-performing loans against a backdrop of fiscal dominance that constrained the central bank’s room for manoeuvre.

By the time the crisis crystallised, gross international reserves had fallen to levels that left the country with minimal buffer against external pressure, the cedi had lost a significant portion of its value, and inflation had accelerated to a peak of 54.1 percent in December 2022, the highest rate recorded in two decades.

One of the BoG’s primary interventions was the absorption of excess liquidity from the financial system, a tightening of monetary conditions that directly targeted the inflationary pressure rather than addressing its symptoms through exchange rate intervention or administrative measures.

As liquidity tightened and inflation fell, the Monetary Policy Committee gained the room to reduce the policy rate. The reference rate and commercial lending rates followed. As monetary conditions improved, the exchange rate reflected those improvements organically, without the Bank fixing a rate.

That sequence, he explained, is important because the alternative sequences available to the Bank carried significant risks. Cutting the policy rate before inflation was sufficiently reduced would have risked reigniting price pressures and undermining the exchange rate, potentially reversing the cedi’s recovery and eroding the reserves position.

Prioritising exchange rate stability through direct intervention, without the underlying disinflation, would have depleted reserves without addressing the monetary conditions driving depreciation.

Either misstep would have produced a disaggregated outcome, with some indicators improving while others deteriorated, leaving the overall position more fragile. The consequence of that fragility, in the current global environment, would be acute. Dr Asiama identified developments in the Middle East as the primary external risk facing Ghana, with oil price volatility and imported inflation as the most direct transmission channels.

A country entering that environment with inflation still above 20 percent, reserves below US$10 billion, a weakening exchange rate, and lending rates that made domestic credit inaccessible would have had limited capacity to absorb the shock without policy reversal or external support.

“This is not the first time Ghana’s economy has suffered a global shock. We will get through it,” the Governor insisted.

Lending rates

Dr Asiama identified the decline in lending rates as the most consequential of the gains recorded during his tenure, describing the previous rate environment as one that made borrowing structurally unworkable for most Ghanaian businesses.

“Lending rates, for me, are the most important one, and I have always said it,” Dr Asiama said. “If you borrow money at over 30 percent, can you really repay it? It is not surprising that non-performing loans are very high,” he added.

The transmission from policy rate to lending rate, a mechanism that has historically operated with significant lag and friction in the banking system, appears to have accelerated. The 10.4 percentage point fall in average lending rates over thirteen months is among the sharpest such movements in recent memory, though average lending rates remain elevated relative to the prevailing inflation rate.

The gap between the average lending rate and headline inflation, currently approximately 16.4 percentage points, means real borrowing costs remain high in absolute terms, even as nominal rates have fallen.

Dr Asiama acknowledged that the work is not complete. The direction in lending rates, however, carries particular significance for the domestic export sector, which was the primary audience at the Fireside Chat, a forum focused on exchange rate stability and export competitiveness.

For exporters managing working capital, the cost of borrowing in cedis has been one of the most persistent structural constraints on competitiveness. A reduction of more than 10 percentage points in average lending rates over thirteen months represents a material improvement in that constraint, though the absolute rate of 19.7 percent remains high by regional and international standards.

Beyond the immediate rate environment, the Governor identified a deeper shift he regards as essential to sustaining the gains: a change in how Ghanaian businesses and households think about the cedi. “For decades, people assumed the cedi would fall by 20 percent next year, and so you price accordingly. We had to reset this whole thing,” Dr Asiama added.

The Governor expressed confidence that sustained stability would alter that behaviour without compulsion. He explained: “If we are able to sustain these gains for another year, I am quite sure that people will not have to be compelled to price in the dollar. They themselves will see the need to operate in the cedi zone.”

Dr Asiama did not set a target for further reductions in lending rates, but indicated that the direction of travel is expected to continue as monetary conditions remain stable and inflation is sustained at current levels.