The Bank of Ghana has maintained its benchmark monetary policy rate at 14 percent while tightening banking sector liquidity rules, as policymakers seek to shield the economy from rising external inflation risks linked to escalating tensions in the Middle East.<\/p>\n\n\n\n
At the conclusion of the 130th Monetary Policy Committee (MPC) meeting, Governor Dr. Johnson Pandit Asiama announced that the central bank would amend the dynamic cash reserve ratio (CRR) framework to a uniform 20 percent reserve requirement maintained entirely in domestic currency, effective June 4, 2026.<\/p>\n\n\n\n
The move marks another adjustment to the Bank\u2019s reserve management regime following reforms introduced in May 2025, when banks were required to maintain reserves in the same currencies as their deposit liabilities. Prior to that amendment, the CRR operated under a tiered structure linked to banks\u2019 loan-to-deposit ratios, ranging from 15 percent to 25 percent depending on lending activity.<\/p>\n\n\n\n
The dynamic CRR framework was initially introduced to discourage banks from concentrating excess liquidity in government securities and instead incentivise lending to the private sector while strengthening monetary policy transmission.<\/p>\n\n\n\n
Speaking during the MPC press briefing, Dr. Asiama said the committee considered it necessary to review the framework after assessing its outcomes over time.<\/p>\n\n\n\n
\u201cSome of the expected benefits for which those dynamic structures of provisioning were put in place, we think it\u2019s about time we reviewed that considering the outcomes that we have observed,\u201d he said.<\/p>\n\n\n\n
He added that the revised framework would complement the Bank\u2019s liquidity management operations and support the transmission of monetary policy.<\/p>\n\n\n\n
\u201cIn the wisdom of the committee, we think that this will go a long way to complement our open market operations,\u201d the governor said. \u201cRemember, our objective is to maintain an appropriate policy stance, the so-called liquidity conditions. That\u2019s how we are able to impact on our transmission.\u201d<\/p>\n\n\n\n
Dr. Asiama also disclosed that the central bank would engage commercial bank executives ahead of implementation to clarify the operational implications of the revised reserve requirement.<\/p>\n\n\n\n
\u201cNext week, we\u2019ll be meeting all CEOs of banks. We\u2019ll take them through the policy, we\u2019ll take them through the implication, and that should be good for the markets,\u201d he said.<\/p>\n\n\n\n
The liquidity tightening measure came alongside the MPC\u2019s decision to hold the benchmark policy rate steady as policymakers weighed rising external risks against easing domestic inflationary pressures.<\/p>\n\n\n\n
\u201cThe Committee assessed risks in the outlook to inflation and growth as broadly balanced and decided to maintain the monetary policy rate at 14.0 percent,\u201d Dr. Asiama said.<\/p>\n\n\n\n
The central bank warned that the ongoing conflict in the Middle East had disrupted trade routes, increased energy prices and heightened global policy uncertainty. According to the Bank, the blockade of the Strait of Hormuz has contributed to rising crude oil prices and renewed inflationary pressures in both advanced and emerging market economies.<\/p>\n\n\n\n
The International Monetary Fund has revised down its 2026 global growth forecast to 3.1 percent from an earlier estimate of 3.3 percent, with further downward revisions possible if the conflict persists.<\/p>\n\n\n\n
Domestically, headline inflation edged up to 3.4 percent in April 2026 from 3.2 percent in March, marking the first increase since December 2024. The rise was driven mainly by non-food inflation and exchange-rate-related base effects, although core inflation continued to ease, indicating moderating underlying price pressures.<\/p>\n\n\n\n
The MPC warned that prolonged geopolitical tensions could keep crude oil prices above US$100 per barrel, increasing the likelihood of fuel price pass-through into transport and utility costs domestically.<\/p>\n\n\n\n
Despite the external risks, the Bank said domestic economic activity remained resilient. The Composite Index of Economic Activity expanded by 12.6 percent year-on-year in March 2026, compared with 2.3 percent growth a year earlier, supported by stronger private sector credit growth, industrial production, consumption and trade activity.<\/p>\n\n\n\n
Private sector credit grew by 28.7 percent in nominal terms in April 2026, compared with 19.9 percent growth in the same period last year. In real terms, credit expanded by 24.5 percent after contracting by 1.1 percent a year earlier.<\/p>\n\n\n\n
Financial conditions also continued to ease. The benchmark 91-day Treasury bill yield declined to 4.9 percent in April from 15.5 percent a year earlier, while average bank lending rates fell to 16.3 percent from 27.4 percent.<\/p>\n\n\n\n
Banking sector balance sheet indicators strengthened further, with the capital adequacy ratio rising to 22.3 percent from 17.5 percent a year earlier. The non-performing loan ratio declined to 18 percent from 23.6 percent, reflecting improved credit recovery and stronger loan growth.<\/p>\n\n\n\n
Still, the central bank cautioned that elevated credit risk remained a concern and said banks would be required to adhere strictly to prudential guidelines aimed at reducing bad loans.<\/p>\n\n\n\n
On the external front, Ghana\u2019s current account surplus improved to US$3.1 billion in the first quarter of 2026 from US$2.43 billion a year earlier, driven by higher gold and cocoa export earnings alongside resilient remittance inflows. Gross international reserves increased to US$14.4 billion as of May 18, equivalent to 5.7 months of import cover.<\/p>\n\n\n\n
The cedi, however, depreciated by 8.4 percent against the US dollar in the year to May 15, largely due to foreign exchange demand from the energy sector and corporate dividend payments.<\/p>\n\n\n\n
The MPC said it would continue monitoring potential spillovers from global geopolitical tensions and take additional policy action if necessary.<\/p>\n\n\n\n