The Governor of the Bank of Ghana, Johnson Pandit Asiamah, has defended the decision by the Monetary Policy Committee (MPC) to maintain the policy rate at 14 percent, insisting that lingering geopolitical tensions in the Middle East continue to pose serious risks to Ghana’s inflation outlook and economic stability.
Responding to questions from journalists during the 130th MPC press briefing in Accra yesterday, Dr. Asiamah described the ongoing Middle East conflict as the “elephant in the room” influencing the central bank’s cautious policy stance.
According to him, although current economic indicators suggest there is room for further monetary easing, the MPC decided to pause and monitor developments due to uncertainties surrounding the global crisis.
“The committee evaluated other forms of risks. The elephant in the room here is the Middle East crisis,” the Governor stated. “Up to this time, one is not sure whether it is temporary or whether it is going to be long-lasting. If we assume that it will be longer-lasting, then you can imagine the impact on inflation expectations and the so-called second-round effects,” he added.
Dr. Asiamah explained that while real interest rate trends indicated possible space for further rate cuts, the MPC considered both domestic improvements and external shocks before arriving at its decision.
“That is why, in the wisdom of the committee, it was decided to pause and evaluate all incoming data so that at the next MPC round, the committee would take an appropriate decision,” he added.
The Governor also addressed concerns about the slow reduction in commercial bank lending rates despite falling benchmark interest rates, explaining that the current low-interest-rate environment remains relatively new to banks, forcing them to gradually adjust their portfolios and lending strategies.
“When interest rates are falling, it may take a while. You don’t just rush into giving loans. There has to be adequate bankable projects and you don’t compromise your credit appraisal standards,” he said.
According to him, banks are acting cautiously to avoid excessive credit risks, but lending rates are expected to adjust downward once the low-interest-rate environment is sustained.
Dr. Asiamah further justified the MPC’s decision to revise the dynamic cash reserve ratio to a uniform 20 percent reserve requirement in domestic currency, effective June 4, 2026.
He explained that the move follows a review of earlier liquidity management measures introduced about a year ago, noting that it would complement open market operations.
The Governor disclosed that the central bank will meet chief executive officers of commercial banks next week to explain the implications of the new policy measures. On recent oversubscription of Treasury bill auctions, he declined to comment on government borrowing strategies, saying such matters fall under the Ministry of Finance.
“You know it’s a market; it’s an auction. The banks and treasuries make those decisions based on market conditions and what they forecast going forward.”
Addressing concerns about the depreciation of the cedi, he stressed that Ghana operates a managed floating exchange rate regime and not a fixed system.
“The cedi is expected to move. It can depreciate or appreciate. Our concern is to avoid excessive volatility,” he said.
Dr. Asiamah attributed recent pressures on the currency mainly to increased foreign exchange demand arising from higher crude oil prices and dividend repatriation by multinational companies during the April–May reporting season.
Despite the pressures, he assured the public that the central bank has adequate foreign exchange buffers, noting that Ghana’s Net International Reserves have risen from US$10.9 billion in April to US$12.43 billion currently.
“We should be able to do what we have to do. What we will ensure is that we won’t see a return to the kind of volatility we saw in previous years,” he said.
On credit distribution, he said commerce continues to receive the largest share of bank credit, but all sectors stand to benefit if private sector lending growth is sustained.
He also revealed that the central bank is developing a digital credit framework that will allow individuals and businesses to access small loans via mobile phones under a regulated system.
“So very soon, no matter which sector you are involved in, you can just raise a loan on your mobile phone,” he said.
Dr. Asiamah further announced that Ghana could see the launch of its first non-interest banking institution before the end of the year, with the regulatory framework being developed in line with international best practices.
On non-performing loans (NPLs), he said the central bank has directed commercial banks to reduce bad loans by the end of 2026, noting that the gross NPL ratio currently stands at 18 percent, while the net figure is around 8 percent after provisions.
He stressed that banks must continue pursuing defaulters to recover loans, warning against moral hazard.
Regarding disruptions to gold exports linked to the Middle East crisis, he said temporary challenges affecting shipments to the United Arab Emirates had been resolved through alternative arrangements, with exports now ongoing.
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