BoG Mandates Banks to Hold Reserves in Original Deposit Currencies from June_Ghana
Starting June 5, 2025, commercial banks in Ghana will be required to maintain their cash reserves in the same currency as the deposits they receive. This is a significant shift from the current system, where all reserves are held in the Ghanaian cedi regardless of the deposit currency. The Bank of Ghana (BoG) has revised its Dynamic Cash Reserve Ratio (CRR) framework to reflect this change, aiming to reinforce the stability of the financial sector and improve the effectiveness of its monetary policy tools.
The existing framework, which mandates reserve holdings in cedis, has been criticized by banks for hampering financial intermediation and increasing operational costs. With the new policy, foreign currency deposits must be backed by foreign currency reserves, while cedi deposits will continue to be supported by cedi reserves. This adjustment is intended to reduce currency mismatches on bank balance sheets, ultimately lowering risks in the banking sector and contributing to macroeconomic stability.
The Governor of the BoG, Dr. Johnson Asiama, announced the policy change as part of the outcomes from the May 2025 Monetary Policy Committee (MPC) meeting. The new CRR rule is expected to foster better alignment between deposit liabilities and reserve holdings, enhancing banks’ resilience in the face of foreign exchange volatility.
In addition to the reserve requirement change, the MPC decided to maintain the policy rate at 28%. This decision reflects the central bank’s cautious approach in light of persistent inflationary pressures, even though recent data shows improved currency stability and strengthening macroeconomic fundamentals.
Dr. Asiama emphasized that while inflation is forecasted to ease more quickly—potentially reaching the medium-term target by the first quarter of 2026—the current inflation levels remain above target. As such, maintaining the policy rate is essential to keep inflation expectations in check and to ensure that the recent economic gains are sustained.
Source: Citi newsroom