• Bank of Ghana slashed policy rate to 25%, but credit costs remain among the world’s highest.
• The Cedi has reversed early-year gains, down 31% since June, with forecasts pointing to further weakness.
• Q2 GDP grew 6.3% on services and commodities, but import demand and uneven inflation weigh on stability.

Ghana’s central bank is treading a fine line between stimulating growth and safeguarding the currency, as high borrowing costs collide with renewed pressure on the Cedi. Despite a record policy rate cut in July, credit remains expensive and businesses are grappling with a weaker local currency.

The Bank of Ghana reduced its benchmark rate by 300 basis points in July to 25%, the steepest single cut in the country’s history. The easing marked a shift from its earlier inflation-fighting stance, after prices trended down for eight consecutive months. But analysts warn that, even after the cut, interest rates remain among the highest globally, limiting access to affordable finance for both government and private sector borrowers.

Currency pressures complicate the outlook. After appreciating 42% against the US dollar in the first five months of 2025, the Cedi has since lost 31%, hitting its weakest level since January 2023. Strong import demand has eroded reserves, which stood at $10.7 billion in April, covering 4.7 months of imports. Forecasts from Barclays see the exchange rate weakening further to around 12 per dollar by year-end.

Inflation has cooled at the national level, dropping to 11.5% in August—its lowest in nearly four years. Yet regional disparities remain stark, with the Upper West region recording inflation of 21.8% compared to just 6.8% in Bono East. Food and transport costs in northern and rural areas continue to outpace declines seen in Accra and other urban centers.

Economic growth remains robust. Ghana’s GDP expanded by 6.3% in the second quarter, outpacing forecasts of 4.8% and supported by strong services growth of nearly 10%. Agriculture and ICT also posted solid gains, but manufacturing and industry remain constrained by high borrowing costs and import-led demand that drains foreign reserves.

Commodities continue to provide a buffer. Gold exports reached $6.3 billion between January and August, as reserves climbed to a record 36 tonnes amid global prices near $3,650 per ounce. Cocoa also benefited from strong demand, with forward sales exceeding $4 billion ahead of the new season, while farmer prices were raised by more than 60%. Low oil prices have further eased the import bill.

Attention now turns to the Bank of Ghana’s September meeting. Policymakers must weigh the benefits of further cuts against risks of deeper currency weakness. The government, meanwhile, faces pressure to curb import growth and accelerate industrial reforms to reduce reliance on foreign goods. Ghana’s economic resilience remains evident, but vulnerabilities in monetary policy, trade, and reserves highlight the fragile balance policymakers must maintain.

Idriss Linge