GRR Drops to 17.86% After Policy Rate Cut: Respite for Businesses as Lending Rates Set to Ease – But Will it Last?

For many years, Ghanaian businesses and households have decried the cost of borrowing in the country, but respite is on the way as lending rates are expected to drop in the coming days.

Loans have been expensive in the country, eating into profits, stifling expansion, and making it nearly impossible for many small firms to survive. But new signs are emerging that the pressure may finally be easing.

The new hope stems from the recent drop in the Ghana Reference Rate (GRR) to 17.86% in October from 19.86% in September 2025. This is as a result of the latest 350basis points cut in the policy rate by the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG).

The GRR is the benchmark rate used by banks to set lending rates. In simple terms, when the central bank cuts its rate, it becomes cheaper for commercial banks to borrow. When banks borrow cheaply, they can lend cheaply. And when lending rates go down, businesses and households breathe a sigh of relief.

Why the Drop Matters

If the GRR is high, banks add their own margins and risk factors, making lending rates shoot up. But with the GRR now at its lowest in years, borrowers can expect loans, whether for a new factory, school fees, or working capital, to come with noticeably lower interest rates.

For entrepreneurs struggling with the high cost of a loan, this is like turning down the heat in an overheated kitchen. Lower lending costs free up cash flow, allowing businesses to reinvest, expand, and hire.

For consumers, it means loans for mortgages, cars, or personal needs won’t be as crushing as before.

Inflation and Treasury Bills Impact

The Bank of Ghana’s rate cut was supported by good news on inflation. Adding to the good news is that September inflation has dropped again to 9.4%, meeting the Bank of Ghana’s end-of-year target ahead of schedule. This creates room for a further reduction in the policy rate in the next MPC meeting, which can trickle down to the GRR and then the lending rates.

A single-digit inflation rate is something Ghana has struggled to sustain for years, and hitting this milestone builds confidence that the economy is stabilising.

Even some analysts note that the current drop in the GRR could have been even larger if not for the recent uptick in the 91-day treasury bill rate. Treasury bills compete directly with bank deposits; when their yields rise, banks feel less pressure to reduce lending rates aggressively.

Can Businesses Begin to Celebrate an Improved Environment?

The development is good news for the business community and even households. The improvement in these indicators is already changing the mood in the private sector.

Businesses that had shelved expansion plans due to high borrowing costs can now begin to reconsider. Investors will be watching closely, and consumer confidence is showing signs of recovery.

Ghana’s business environment, which has long been battered by high inflation and interest rates, is showing signs of becoming friendlier.

The Caution

The good news, however, comes with caution. The improvement is not cast in stone. Analysts maintain that the sustainability of the improvement is everything.

Ghana has seen temporary dips in inflation and interest rates before, only for them to shoot back up when global shocks or fiscal slippages hit.

If government overspending returns, if cedi depreciation accelerates, or if global commodity prices spike, the fragile progress could unravel quickly.

This means policymakers must not only celebrate the short-term gains but also commit to structural reforms that keep inflation low, maintain fiscal discipline, and deepen confidence in the financial sector.

With this improvement, businesses and borrowers can finally breathe a little easier. For now, the cut in the policy rate is trickling down into the Ghana Reference Rate, and lending costs are beginning to fall. That is good news for a country where high interest rates have strangled growth for too long.

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