Hon. Abena Osei Asare, the Chairperson of Parliament’s Public Accounts Committee (PAC), has called on the Bank of Ghana (BoG) to reduce the significant disparity between its monetary policy rate and the prevailing inflation rate, which currently stands at 5.4%.
She pointed out that since inflation has now dropped below the central bank’s medium-term target range of 8% ±2, the BoG has ample scope to adjust its policies by lowering interest rates. This move, she argued, would help decrease borrowing expenses and encourage greater economic growth.
The appeal was made on Monday during a PAC session held to review the Auditor-General’s Report on the Public Accounts of Ghana for Ministries, Departments, and Other Agencies, covering the period ending December 31, 2024.
Highlighting her worry about the substantial spread between the policy rate and the 5.4% inflation figure, the PAC Chair pressed the central bank to relax its monetary approach.
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“The gap between the policy rate and this 5.4% inflation level is notably large. Given that inflation is now under your target, it may be time to loosen monetary policy measures to achieve a better equilibrium,” she remarked.
She stressed that such easing would deliver much-needed support to households and companies facing elevated interest rates on loans.
“We support you to make sure that you ease the burden on the people we represent. Parliament will gladly support any move that helps balance the economy now that you’ve hit your targets,” she added.
Responding to the concerns, the Governor of the Bank of Ghana, Dr. Johnson Pandit Asiama, assured Parliament of the central bank’s commitment to prudent and responsible monetary management as inflation continues to trend downward.
He disclosed that credit conditions are already improving, citing a significant decline in lending rates.
According to him, as at the Bank’s last Monetary Policy Committee (MPC) meeting at the end of November, average lending rates had dropped to 22.2 percent, compared to 30.5 percent during the same period last year.
“So, on the contrary, things are actually getting better. Lending rates are on the decline,” Dr. Asiama noted.
He further revealed that the Ghana Reference Rate (GRR) has fallen sharply and currently stands at approximately 15 percent, reinforcing the improving credit environment.
“So, Madam Chair, we are on the bend. The lending activity by the banks is following the general stabilization and the decline in other interest rates. We hope to see more of this as we go on,” he said.
Dr. Asiama explained that multiple monetary policy transmission channels are working together to support the economy, including the exchange rate channel, the interest rate channel, the lending channel, and the expectations channel.
He noted that the exchange rate channel remains particularly strong in Ghana, with rapid pass-through effects, which contribute to the country’s current macroeconomic stability.
“We believe that all these channels are working in unison, and that’s why we are seeing the progress that we are making,” the BoG Governor said.
Beyond traditional policy tools, Dr. Asiama disclosed that the central bank is actively engaging commercial banks to support the real sector, particularly exports and market expansion for Ghanaian businesses.
He added that foreign-owned banks, especially those from South Africa and Nigeria, are well-positioned to assist local businesses in accessing new markets.
“We will continue to push hard on these fronts, in addition to the traditional monetary policy making that we are doing. We are supporting the government to a great extent,” he assured Parliament.