Alex Mould Questions Ghana’s High Interest Rates Despite Economic Improvements

Former Executive Director of Standard Chartered Bank, Alex Mould, has raised serious concerns about the Bank of Ghana’s (BoG) decision to maintain a high Monetary Policy Rate (MPR) of 25%, even as key economic indicators show marked improvement. In a recent statement, Mould challenged the rationale behind the central bank’s stance, pointing out a widening gap between policy decisions and actual market conditions.

Mismatch Between Policy Rate and Market Signals

Mould’s critique is grounded in recent data that suggest a much more favorable economic climate than the MPR reflects. Treasury bill rates, particularly the 91-day instrument, have dropped to 10.29%, and interbank lending rates currently hover below 15%. These are clear signs of declining short-term borrowing costs and strong liquidity in the financial system.

“The banks are flush with cash,” Mould observed. “Some institutions are even rejecting fixed-term deposits because they don’t need the funds, and it costs too much to hold them. Yet we’re not seeing lending rates drop for businesses or consumers.”

This disconnect, he argued, undermines the intended impact of the MPR as a policy tool meant to guide inflation expectations, support borrowing, and stimulate growth.

Structural Flaws in Rate-Setting Mechanism

According to Mould, a key reason for the persistence of high lending rates is the way the Ghana Reference Rate (GRR) is structured. The GRR which banks use to determine lending rates is made up of 40% MPR, 40% 91-day Treasury bill rate, and 20% interbank rate. Despite the notable fall in both Treasury and interbank rates, the heavy weighting of the MPR keeps the overall GRR high, estimated to be around 23%.

This elevated benchmark limits access to affordable credit, particularly for businesses that rely on bank financing to operate and expand.

“With inflation falling now at 13.7% as of June, and liquidity strong, there’s a clear case for reducing the MPR below 20%,” Mould said. “Lower interest rates reduce production costs and help bring prices down, which in turn helps stabilize inflation.”

A Call for Better Policy Coordination

Mould also acknowledged the wider economic reforms underway, referencing the government’s “RESET” agenda led by President John Dramani Mahama. He credited Finance Minister Dr. Cassiel Ato Forson and BoG Governor Dr. Johnson Asiama for steering the country through challenging times, but maintained that more needs to be done to align monetary policy with current economic realities.

“Ghana is not suffering from a liquidity shortage,” Mould emphasized. “We have a policy mismatch. Until we realign the MPR with market trends, businesses will continue to face steep borrowing costs that hamper productivity and growth.”

He concluded by urging the Bank of Ghana’s Monetary Policy Committee (MPC) to reconsider its position at the next meeting. “There’s an opportunity to support the real economy without compromising inflation control. The data is on our side, what we need now is responsive policymaking.”

Source: GhanaFeed.Com