Bank of Ghana Keeps Policy Rate at 14% Amid Middle East Risk

*TL;DR – The Bank of Ghana left its policy rate unchanged at 14% because the ongoing Middle East crisis threatens inflation, even as net international reserves climbed to $12.43 bn and non‑performing loans remain high.*

Context The Monetary Policy Committee met for its 130th session in Accra and voted to maintain the policy rate at 14%. Governor Johnson Pandit Asiamah described the Middle East conflict as the “elephant in the room,” warning that prolonged instability could feed higher inflation expectations and second‑round price effects.

Key Facts - Policy stance: The benchmark rate stays at 14%, the highest among major African economies. The decision follows a pause after earlier cuts that brought the real interest rate into positive territory. - External shock: The governor highlighted the Middle East crisis as a major external risk, noting uncertainty over its duration and impact on global commodity prices. - Reserves buffer: Net international reserves rose from $10.9 bn in April to $12.43 bn, providing a cushion against foreign‑exchange pressure from higher crude oil costs and dividend repatriations. - Credit quality: Gross non‑performing loan (NPL) ratio sits at 18%, while the net NPL ratio after provisions is about 8%, indicating significant stress in the banking sector. - Liquidity tool: A uniform 20% cash reserve ratio on domestic currency deposits takes effect on June 4, 2026, aimed at supporting open‑market operations. - Market reaction: Ghanaian bank stocks, such as GCBL (Ghana Commercial Bank) and CAL (CalBank), slipped 1.2% and 0.9% respectively on the Ghana Stock Exchange (GSE) after the announcement, reflecting investor caution. - Lending rates: Commercial banks have been slow to pass benchmark cuts to loan pricing, citing the need to preserve credit standards while the low‑rate environment is still new.

What It Means Holding the rate signals that the BoG prioritizes price stability over immediate growth stimulus. The reserve buildup improves the central bank’s capacity to intervene if the cedi faces sharp depreciation, but the high NPL ratios suggest that banks remain vulnerable to a credit shock. The uniform reserve requirement should tighten liquidity, supporting the BoG’s open‑market operations and helping anchor inflation expectations.

Looking Ahead Watch for the next MPC meeting in July, where the committee will assess whether the Middle East situation eases enough to permit a rate cut, and monitor how the new reserve ratio influences bank lending spreads.