Ghana’s lending landscape has undergone a dramatic transformation, with the Ghana Reference Rate (GRR) dropping to 17.86 percent in October 2025, marking its lowest point in more than two years and signaling relief for businesses and borrowers.
The Ghana Association of Banks announced the reduction from 19.86 percent in September, representing a two percentage point decline expected to influence lending and borrowing costs across the banking sector. The rate, which stood at 29.72 percent in January 2025, has undergone steady declines throughout the year.
The GRR serves as the baseline commercial banks use to price all loans in the banking sector. The rate mirrors the combined movement of the 91 day Treasury bill rate, the Monetary Policy Rate and the interbank overnight rate, all of which have moved downward rapidly in 2025.
Industry analysts have linked the latest cut to consistent decline in key economic variables such as inflation, treasury bill yields, and the Bank of Ghana’s policy rate, which has been slashed by over 600 basis points to 21.5 percent. The central bank’s aggressive easing cycle followed months of holding rates elevated during Ghana’s inflation crisis.
Treasury bill yields have led the downward charge. The 91 day treasury bill rate fell from 13.4 percent at the end of July 2025 to 10.3 percent in August. This turnaround signals renewed investor confidence, reduced domestic borrowing pressures and improved macroeconomic stability.
The dramatic fall in short term government securities significantly lowered the base cost of funds used in the GRR formula, accelerating the overall decline. The government’s reduced appetite for expensive short term funding has allowed the entire interest rate structure to respond favorably.
Interbank rates have cooled alongside treasury yields and policy rate adjustments. Overnight interbank rates, representing the cost at which banks lend to one another, softened from approximately 27 percent early in the year to 21 percent by October. This cooling points to improved liquidity within the banking sector, supported by better reserve positions and a more predictable macroeconomic climate.
According to the Bank of Ghana’s recent Monetary Policy Report, average lending rates have eased from 26.6 percent to 24.2 percent. The shift presents relief for businesses that have struggled under punishing borrowing costs for years.
Manufacturers, traders, small and medium enterprises, and households are gradually seeing improved loan pricing, particularly for medium term and working capital facilities. The new rate level creates breathing room for companies that had shelved expansion plans and consumers who had postponed major purchases.
However, the shift presents challenges for banks. Lower reference rates compress interest margins and force lenders to become more efficient in risk management, cost control and credit allocation. The competitive landscape may intensify as institutions seek to retain strong borrowers and win new clients in a lower rate environment.
The sustainability of the downward trend will depend on disciplined economic management and stable domestic financing conditions. If inflation continues its downward path and fiscal pressures remain contained, Ghana may be entering a new phase of interest rate normalization that supports growth rather than stifling it.
September inflation dropped to 9.4 percent, hitting the Bank of Ghana’s year end target three months early and marking the ninth consecutive monthly decline. Single digit inflation creates conditions for further monetary policy easing, which could push the GRR even lower when the Monetary Policy Committee meets again.