IMF Warns Bank of Ghana on Policy Rate Cuts Amid Global Risks

• The International Monetary Fund (IMF) has advised the Bank of Ghana (BoG) to proceed cautiously with further policy rate reductions.
• The IMF's caution is rooted in concerns about potential second-round effects from the impact of the war in the Middle East on energy and fertiliser prices.
• The BoG has been reforming its monetary policy operations, including replacing 56-day bills with 14-day bills in December 2025.
• The IMF's advice is likely to impact loan and investment opportunities in Ghana, as investors may be hesitant to engage with a country that is perceived as taking on excessive risk.

The IMF's cautionary note on policy rate cuts has significant implications for the BoG's future policy decisions.

The International Monetary Fund (IMF) has issued a warning to the Bank of Ghana (BoG), advising it to proceed cautiously with further policy rate reductions. The IMF's caution is rooted in concerns about potential second-round effects from the impact of the war in the Middle East on energy and fertiliser prices, as well as persistent risks from high exchange rate pass-through. These factors could shift the monetary policy stance from neutral to accommodative, which would not be warranted at this time. The IMF's advice is significant, given that the BoG has already implemented a series of policy rate cuts in recent months, with the last decrease occurring in March 2026, and the policy rate subsequently held unchanged at 14% in May and July 2026. This reduction brought the policy rate down to 14%, with cumulative cuts totaling 1,400 basis points since July 2025.

In a bid to strengthen liquidity management, the BoG has been reforming its monetary policy operations. One key change was the replacement of 56-day bills with 14-day bills in December 2025. This move has had a significant impact on liquidity absorption and the use of the standing deposit facility. As a result, BoG bill and interbank rates have moved towards the bottom of the interest rate corridor, effectively loosening monetary conditions by approximately 350 basis points relative to the policy rate. The IMF's staff advice was instrumental in shaping these reforms, which are aimed at improving the effectiveness of monetary policy.

The IMF's cautionary note on policy rate cuts has significant implications for the BoG's future policy decisions. The Fund's advice is likely to impact loan and investment opportunities in Ghana, as investors may be hesitant to engage with a country that is perceived as taking on excessive risk. Lawyers advising clients in Ghana should be aware of these developments and their potential consequences. The IMF's advice also highlights the need for careful consideration of the potential second-round effects of policy rate cuts, particularly in light of the ongoing war in the Middle East and its impact on energy and fertiliser prices.

Lawyers advising clients in Ghana should be aware that the IMF's cautionary note may impact future policy rate decisions, potentially affecting loan and investment opportunities.

Source: Original reporting via Joy Business