Banks to hold reserves in original deposit currencies from June

Commercial banks in Ghana must now keep cash reserves in the same currency as their deposits. This is a significant change from the Bank of Ghana's (BoG) Dynamic Cash Reserve Ratio (CRR) framework. The new rule aims to improve financial stability and enhance monetary policy. It will take effect on June 5, 2025.

Currently, the CRR is set at 14%. Banks are required to hold all reserves in domestic currency. This measure aims to tighten liquidity and stabilize inflation. However, banks have raised concerns that higher reserve requirements limit financial intermediation and raise operational costs.

Under the revised policy, foreign currency deposits must be backed by foreign currency reserves. Similarly, cedi deposits will require local currency reserves. The Central Bank wants to reduce currency mismatches on banks' balance sheets. This move aims to minimize risks for macroeconomic stability.

Governor Dr. Johnson Asiama announced this change during a recent meeting of the Monetary Policy Committee (MPC). The MPC also decided to keep the benchmark policy rate steady at 28%. This cautious approach addresses ongoing inflationary pressures despite some improvements in economic indicators.

The latest forecasts suggest inflation may ease due to tight monetary policies and exchange rate stability. Inflation is expected to reach medium-term targets by early 2026, barring unexpected shocks. Despite these positive signs, current inflation levels remain high compared to targets.

The committee believes maintaining the policy rate at 28% is necessary for now, according to the Governor.