Indicators Show Borrowing Costs in Ghana Are Declining — But Is That the Case?

Key benchmark rates used to determine lending costs in Ghana have been on a steady decline over the past year, pointing to what appears to be a shift toward lower borrowing costs. However, despite the downward movement of these indicators, questions persist over whether the change is being reflected in commercial lending rates available to businesses and individuals.

The Ghana Reference Rate (GRR), which serves as the base rate for loan pricing in the banking sector, dropped from 29.82% in April 2024 to 23.99% in April 2025. Although there was a brief uptick in December 2024 and early 2025, reaching a high of 29.96% in February 2025, the rate has since fallen sharply by nearly 6 percentage points in just two months. This marks the lowest GRR recorded in over a year, reflecting a potentially significant shift in the cost structure for bank lending.

Over the same period, the 91-day Treasury Bill rate, a short-term risk-free benchmark, fell significantly from 25.68% to 15.47%. The decline was gradual through most of 2024 but became more pronounced from February 2025, when the rate stood at 26.93%, to April 2025, where it reached its lowest point. The over 11 percentage point drop in just two months suggests easing pressure on short-term government borrowing and improved investor demand for debt instruments.

The Interbank Weighted Average Rate, which reflects the cost at which banks lend to one another, also decreased from 28.68% in April 2024 to 26.92% in April 2025. The decline has been more measured compared to the other benchmarks, with the rate largely stable for much of 2024 before beginning a steady descent from October onward. Between October 2024 and March 2025, the rate fell by nearly 1.5 percentage points, before edging slightly up in April.

These rates are critical in shaping the lending environment. The GRR provides the foundation for setting minimum interest rates, while Treasury bill and interbank rates influence liquidity and short-term funding costs for banks. Movements in these indicators typically affect how banks price loans to customers.

The sharpest declines occurred in the first quarter of 2025. The 91-day Treasury Bill rate fell by over 11 percentage points between February and April, while the GRR dropped by nearly 6 percentage points in the same period. These shifts are often associated with changing macroeconomic conditions such as lower inflation, improved investor confidence, and a reduction in government borrowing pressure on the domestic market.

Despite the trend, available lending rates in the banking sector have not shown a corresponding decline. While market fundamentals suggest there is room for lower loan pricing, lending rates have remained relatively high across various credit products. This has led to a growing divergence between headline interest indicators and the actual cost of credit.

The slow transmission may be due to structural factors within the financial system, including risk-based pricing models, operational costs, and ongoing concerns about loan defaults. As a result, the anticipated reduction in the cost of borrowing has not yet materialised fully for many borrowers.

While the decline in benchmark rates provides a strong signal of easing monetary conditions, whether this is translating into more affordable credit across the economy remains uncertain. The data suggests a shift is underway, but its impact on lending behaviour and access to credit is still unfolding.

Read More