By Francis Ntow
Accra, May 19, GNA – Dr Sajid Chaudhry, an economist at Aston University, United Kingdom, says Bank of Ghana policy rate cuts will have limited impact on economic growth unless banks reduce lending rates.
He said lower lending rates were necessary to stimulate economic growth but expressed concern about the slow transmission of policy rate cuts by commercial banks.
Dr Chaudhry, who is also an International Fellow of the Institute of Economic Affairs (IEA), speaking at a forum on interest rates and economic development in Ghana, said the effectiveness of monetary easing depended on its impact on lending costs and private-sector credit.
“Monetary easing can support growth in Ghana, but only if it is transmitted through lower lending costs, stronger private-sector credit, stable exchange rates, and healthier bank balance sheets,” he said.
Dr Chaudhry said an analysis of data from 2002 to 2024 showed that reductions in lending rates were associated with higher Gross Domestic Product growth, while higher interest rates and inflation weakened growth.
He said commercial banks had been slow to adjust lending rates downward, maintaining wide net interest margins due to non-performing loans, exchange-rate instability and broader macroeconomic uncertainty.
“Policy should therefore combine monetary easing with measures that strengthen credit intermediation and bank balance sheets,” he said, while commending the Bank of Ghana for lowering rates in line with falling inflation.
Dr Chaudhry recommended that the Central Bank use regulatory measures to encourage faster transmission of policy rate cuts to borrowers and improve deposit rates when monetary policy tightened.
“The central bank can use some kind of regulatory measures to really to persuade banks to really translate those interest rate monetary policy rate cuts into the lending rates,” he stated.
Responding to questions from the Ghana News Agency, Dr Chaudhry urged commercial banks to strengthen loan screening and monitoring, while encouraging businesses to improve productivity and repay loans on time.
“When banks have high levels of bad loans, they’re less willing and able to pass lower policy rates through to cheaper lending, which blocks the impact of monetary easing on growth,” he said.
Dr Chaudhry also urged Government to maintain macroeconomic stability through stable exchange rates, controlled inflation, prudent spending and a sound banking sector to support lower lending rates and economic growth.
GNA
Edited by Kenneth Sackey
20 May 2026
Picture attached
Reporter: Francis Ntow