The Ghana Reference Rate (GRR) fell further to 10.04% in October 2026, down from 10.18% in September, as borrowing conditions in the banking sector continued to ease despite the Bank of Ghana maintaining its Monetary Policy Rate at 14%. The latest 0.14 percentage-point decline extends a significant downward trend in the benchmark rate used by commercial banks to price loans, with the GRR having fallen by a cumulative 5.64 percentage points since January 2026.
What is the Ghana Reference Rate?
The Ghana Reference Rate was introduced in April 2017 by the Bank of Ghana in collaboration with the Ghana Association of Banks, replacing the previous Base Rate model as part of a shift toward a more market-based framework for base rate determination. The GRR is calculated as a weighted average of three key variables: the Bank of Ghana’s Monetary Policy Rate (MPR), the interbank lending rate and the 91-day Treasury bill rate. Unlike the Annual Percentage Rate (APR), which includes bank-specific charges such as insurance fees and processing costs, the GRR does not include bank-specific charges integral to the provision of credit.
Under the framework, a bank prices its flexible and fixed-term loans by adding or subtracting its risk premium to the GRR. Flexible or floating-term loans reset after each month’s publication of the GRR, while fixed-term loan rates run until maturity. This means that while a decline in the GRR can provide relief to borrowers with variable-rate facilities, customers with fixed-rate loans are unlikely to be immediately affected by the latest reduction.
GRR Movement in 2026
The Ghana Reference Rate has recorded mixed movements throughout 2026, reflecting the dynamic interplay of money-market conditions. The benchmark stood at 15.68% in January before easing to 14.58% in February and then dropping sharply to 11.71% in March — a decline of nearly three percentage points in a single month. The rate continued to decline to 10.06% in April, before easing marginally to 10.03% in May and 10.02% in June.
The trend briefly reversed in mid-year, with the GRR rising to 10.59% in July and 10.61% in August. Industry data suggested the July rise was driven mainly by an increase in the 91-day Treasury bill rate and the Bank of Ghana’s decision to raise the Cash Reserve Ratio (CRR) to 20% from 15% — replacing the previous tiered CRR framework with a uniform requirement regardless of a bank’s Loan-to-Deposit Ratio. The higher cash reserve requirement was intended to strengthen liquidity management and support efforts to stabilise the cedi.
The benchmark resumed its downward trajectory in September, falling to 10.18%, before declining further to 10.04% in October. The latest decline was largely influenced by slight reductions in Treasury bill rates and interbank market rates, reflecting easing conditions in the money market and increased liquidity and competition among banks.
A Divergence from the Policy Rate
The latest movement highlights a key distinction in Ghana’s monetary framework — the divergence between the Bank of Ghana’s policy rate and the Ghana Reference Rate. The Bank of Ghana has maintained its Monetary Policy Rate at 14% since March 2026, when the Monetary Policy Committee reduced it by 150 basis points. The MPC subsequently held the rate steady for three consecutive meetings, adopting a cautious approach as recent increases in energy, utility and transport costs created fresh risks to the inflation outlook.
All seven members of the Monetary Policy Committee voted to maintain the policy rate at 14% at the most recent meeting, with the Committee viewing the balance of risks to inflation and growth as broadly balanced. Domestically, the economy recorded real GDP growth of 6.0% in the second quarter of 2026, driven mainly by the services and industry sectors. Inflation increased marginally to 5.0% in August from 4.6% in July, mainly due to higher non-food inflation following utility tariff adjustments and elevated crude oil prices. Despite the increase, headline inflation remained below the lower bound of the BoG’s medium-term target band of 8% ±2.0%.
The divergence between the GRR and the policy rate suggests that movements in the benchmark this year have been influenced more by fiscal and money-market conditions than by changes in the central bank’s policy rate. Treasury bill rates, which reflect developments in government borrowing and fiscal conditions, have played a significant role in driving the GRR’s decline, while interbank market dynamics, including increased liquidity and competition among banks, have also contributed.
What the Decline Means for Borrowers
The sustained decline in the GRR could provide meaningful relief to borrowers with variable-rate loan facilities as lending costs continue to ease. For businesses, sustained declines in the benchmark could reduce financing costs for working capital, equipment purchases and expansion, potentially improving cash flows and investment decisions. For households, the development could also provide some relief on variable-rate loans.
Average lending rates have already fallen to around 15%, while some customers are reportedly accessing credit at rates between 11% and 12.5%. At the start of 2026, average lending rates stood at 20.58% in January, declining steadily to 19.17% in February, 17.74% in March, 16.33% in April, 15.83% in May and 15.64% in June — their lowest level in more than a year. This represents one of the sharpest reductions in financing costs in recent history, with the cost of bank credit falling by more than 11 percentage points within 12 months.
Private-sector credit has responded strongly to the improving financial conditions. Private-sector credit expanded 41.2% year-on-year in June 2026, compared with growth of 8.6% in June 2025, while total bank advances increased to GH¢124.3 billion from GH¢89.7 billion a year earlier.
However, the impact on individual borrowers will depend on how each bank prices its loans. A fall in the GRR does not automatically mean that all lending rates will decline by the same margin, as banks also consider credit risk, operating costs and other pricing factors. The transmission from falling benchmark rates to actual borrowing costs is often slow, uneven and selective — for large corporates with stronger balance sheets and lower perceived risk, the easing cycle could gradually improve access to financing, but for smaller businesses operating in sectors vulnerable to demand shocks, meaningful relief may take longer to materialise.
What the Decline Means for Banks
The sustained decline could be important for Ghana’s banking sector as banks seek to expand credit to the private sector while managing profitability. Lower borrowing costs can encourage businesses that had previously been discouraged by high interest rates to return to the credit market, supporting increased demand for loans.
However, the decline also puts pressure on banks to carefully manage their interest margins. If lending rates fall faster than the cost of mobilising deposits, banks could face pressure on their spreads and overall interest income. The weighted average overnight interbank rate declined to 10.24% in June from 27.02% a year earlier, reducing banks’ short-term funding costs and creating room for lenders to cut loan pricing.
Bank of Ghana Governor Dr. Johnson Pandit Asiama has urged banks to increase financing to the productive sectors as monetary conditions improve, with particular attention to small and medium-sized enterprises and agriculture. The central bank has indicated that falling money-market rates are already translating into stronger private-sector credit, but the distribution of the additional lending remains important to the broader economic impact.
The Road Ahead
The trajectory of the Ghana Reference Rate in the coming months will depend on several factors, including the outlook for Treasury bill yields, interbank market liquidity, and the broader macroeconomic environment. Analysts at Databank Research have indicated that the Bank of Ghana could resume cutting its policy rate at its final Monetary Policy Committee meeting of 2026, but the decision will depend largely on the outlook for fuel and other energy-related costs and their impact on inflation expectations. The MPC has adopted a risk-management pause rather than a fundamental change in the disinflation outlook, with underlying inflation remaining contained and the real policy rate firmly positive.
A sustained reduction in fuel and related transport costs could ease pressure on businesses and households, helping to keep inflation expectations anchored and creating more room for the MPC to resume monetary easing. However, if fuel and energy costs remain elevated, the MPC may be more cautious, particularly if the higher costs begin to feed into the prices of other goods and services.
As things stand, the continued decline in the Ghana Reference Rate signals that borrowing conditions in Ghana’s banking sector are steadily easing, even as the central bank holds its policy rate steady. For businesses and households seeking credit, the trend offers the prospect of more affordable financing — though the full transmission of these gains to the real economy will depend on how effectively banks pass on lower funding costs to their customers.
