Strong Buffers, Low Credit Costs to Power Ghana’s Growth — BoG
Governor says strong external buffers and cheaper credit must work together to unlock investment, stabilise the cedi and reduce import dependence.
Ghana’s record foreign reserves are being strategically leveraged to drive down lending rates and unlock industrial growth, rather than sitting idle as a financial buffer, Governor of the Bank of Ghana, Johnson Asiama, has indicated.
Speaking at the Ghana Exim Fireside Chat in Accra, Dr. Asiama reframed the ongoing debate over whether the country should prioritise reserve accumulation or domestic investment, insisting that both objectives are mutually reinforcing.
He explained that strong reserves provide macroeconomic stability, particularly in exchange rate management, which in turn reduces risk premiums and creates the conditions for lower lending rates and increased private sector investment.
The central bank has already begun aligning policy toward this goal, gradually easing its monetary stance while tightening liquidity conditions. The recent reduction of the policy rate from 15.5% to 14% reflects this balancing act.
At the same time, the Bank has been actively mopping up excess liquidity, absorbing about GH¢17 billion from the financial system in 2025 alone to stabilise inflation and support the effectiveness of monetary policy.
Ghana’s external position has strengthened significantly, with gross international reserves reaching a historic US$13.8 billion by the end of 2025—equivalent to about 5.7 months of import cover.
This growth was largely supported by the Domestic Gold Purchase Programme, which has boosted foreign exchange inflows and strengthened the country’s reserve buffers.
Dr. Asiama stressed that the real impact of strong reserves lies in their ability to support lower borrowing costs. He noted that high lending rates—previously above 30%—had made it nearly impossible for businesses to invest in productive sectors.
The recent decline in lending rates to below 20%, he said, marks a critical turning point in making industrial investment more viable.
According to him, affordable credit is essential for transforming Ghana’s economy, as it enables businesses to expand production, invest in technology, and reduce dependence on imports over time.
He also clarified that imports are not inherently problematic, provided they are geared toward capital goods and inputs that enhance long-term productive capacity.
The Governor warned that weak reserves would have the opposite effect—triggering currency instability, higher interest rates, and reduced investor confidence.
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He therefore emphasised that building reserves and lowering borrowing costs must go hand in hand to achieve sustainable economic growth.
Ghana’s current strategy, he noted, is designed to use strong external buffers as a foundation for industrial expansion, improved credit access, and long-term economic resilience.
