Editorial: Dynamic cash reserve ratio amended

The Bank of Ghana has made important changes to its policies.

Foreign currency deposits must now be backed by foreign reserves. Cedi deposits must be backed by cedi reserves.

The bank introduced a new cash reserve ratio (CRR) framework. This framework varies based on banks’ loan-to-deposit ratios.

CRRs are set at 25 percent for LDRs below 40 percent. They are 20 percent for LDRs between 40 and 55 percent. For LDRs above 55 percent, CRRs are set at 15 percent.

These changes have increased reserves at the central bank significantly. They also helped absorb excess liquidity in the market.

Governor Dr. Johnson Pandit Asiama explained these changes during a press briefing. He stated that they aim to tighten the liquidity framework and improve monetary transmission.

Consumer and business confidence is at its highest in seven years. This rise is supported by declining inflation and a stable exchange rate.

The Governor noted that the Monetary Policy Committee (MPC) expects faster convergence toward the inflation target by early 2026. The end-year inflation target is now set at 12 percent.

However, the MPC acknowledges that inflation remains high compared to its medium-term goal. Asiama emphasized that maintaining a tight monetary policy is essential for disinflation.

The unchanged policy rate reflects cautious optimism from the bank. It balances consolidating gains with awareness of ongoing vulnerabilities.

The next MPC meeting is scheduled for July 2025.