Ghana’s financial sector is set for a significant shift as the Ghana Reference Rate (GRR), a key benchmark used by commercial banks to price loans, dropped sharply to 15.9% in December 2025.
This represents a remarkable decline from November’s 17.93% and signals a substantial reduction in the cost of borrowing for businesses and individuals. Analysts suggest that this drop will have wide-ranging effects on lending rates, investment decisions, and economic activity.
Data from the Ghana Association of Banks indicates that the GRR fell by 200 basis points from the previous month. This decline is largely attributed to improvements in several key indicators used in calculating the reference rate. Notably, the Monetary Policy Rate was reduced by 350 basis points to 18%, a factor that has played a major role in lowering the benchmark. Treasury bill rates and interbank market rates also recorded slight decreases, contributing to the overall decline.
The GRR has been on a downward trend for most of 2025. Starting the year at 29.72% in January, the rate peaked briefly at 29.96% in February before steadily declining to 19.67% by August. The recent drop to 15.9% represents one of the most significant monthly decreases and highlights the effect of targeted monetary measures aimed at easing credit conditions.
Implications for Borrowers
The fall in the Ghana Reference Rate is expected to translate directly into lower lending rates for new loans. Commercial banks typically benchmark their loan products against the GRR, which means borrowers who take out variable-rate loans in December are likely to benefit from reduced interest payments. However, those with fixed-rate loans will not experience immediate changes in their repayment obligations.
For businesses struggling with access to credit amid a liquidity squeeze, this development comes as a relief. Lower borrowing costs can enhance working capital management, facilitate investment in expansion projects, and support operational sustainability. Experts believe that the new rate may also encourage more businesses to seek financing, which could boost economic activity in the coming months.
Banks are expected to adjust their lending rates downward in response to the GRR decline. While some institutions may implement immediate reductions, others might take a gradual approach depending on internal pricing strategies and risk assessments. The easing of credit conditions could increase loan demand, but banks will need to balance this with the risk of non-performing loans.
The Monetary Policy Report shows that average lending rates have already started to decline, falling from 26.6% to 24.2%. This indicates a general easing of the credit environment and suggests that the GRR drop could accelerate this trend. Lower interest rates may also reduce the cost of capital for banks, allowing them to offer more competitive loan products.
Historical Context of the Ghana Reference Rate
The GRR was introduced in 2017 by the Bank of Ghana and the Ghana Association of Banks as a transparent benchmark for determining lending rates. It replaced the old base rate model and was designed to create a consistent and open framework for loan pricing. The maiden GRR, set in April 2017, stood at 16.82%. Since then, the rate has been adjusted periodically based on market conditions, monetary policy decisions, and other economic indicators.
Over the years, the GRR has become a central guide for interest rate decisions across Ghana’s financial sector. Its recent drop reflects the government’s and central bank’s efforts to stimulate lending, support businesses, and promote economic growth while maintaining financial stability.
The decline in the GRR is likely to have wider implications beyond the banking sector. Lower interest rates can encourage borrowing for consumption and investment, potentially driving growth in key industries such as manufacturing, agriculture, and services. Reduced borrowing costs may also attract foreign investors seeking favorable credit conditions, contributing to overall economic expansion.
However, experts caution that the full benefits of the GRR drop depend on banks’ willingness to pass on the reductions to borrowers. Monitoring the implementation of lower lending rates will be critical in assessing the real impact of this development on the economy.
Borrowers are expected to benefit from lower interest payments, while businesses may gain improved access to credit at more affordable rates. The banking sector faces both opportunities and responsibilities as it adjusts to the new benchmark. If implemented effectively, this move could support economic growth, investment, and financial stability across Ghana.
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