Inflation falls to 3.8% yet loans remain expensive — Prof. Bokpin

Despite Ghana’s sharp slowdown in inflation to 3.8 percent, households and businesses are yet to experience meaningful relief from high borrowing costs—a disconnect that economist Professor Godfred Bokpin says is becoming increasingly difficult to justify.

Prof. Bokpin noted that although the Bank of Ghana recently cut its policy rate by 250 basis points to 15.5 percent, the gap between key interest rates and inflation remains unusually wide.

In an interview with Citi Business News, the economist questioned why lending conditions remain tight despite the significant decline in inflation.

“When you compare the policy rate of 15.5 percent with inflation at 3.8 percent, the real return is far too high, and that is abnormal,” he said.

He explained that the slow transmission of macroeconomic gains to borrowers reflects a reluctance to pass on the benefits of disinflation to the private sector.

“Interest rates, like inflation and exchange rates, are prices. Once inflation falls significantly, other macro prices—the policy rate, Ghana Reference Rate, and lending rates—should adjust downward accordingly,” Prof. Bokpin stressed.

The economist warned that failing to narrow the gap could hinder private sector growth, suppress credit demand, and weaken overall economic recovery—particularly at a time when Ghana needs investment-driven growth.

He also cautioned that persistently high real interest rates could undermine public confidence in official inflation figures.

“Otherwise, we may reach a point where people start questioning the inflation rate and why other key macroeconomic rates are not responding,” he added.