Time to Reform the Ghana Reference Rate: From treasury bill yields to banks’ deposit costs
For businesses borrowing to buy equipment, restock a shop or meet payroll, the price of credit affects everyday decisions. The Ghana Reference Rate (GRR) provides a common starting point for that price. Its usefulness depends on whether the formula reflects financing conditions and whether borrowers can understand how it becomes the interest rate they pay.
The Ghana Reference Rate (GRR) is a benchmark interest rate that influences the cost of borrowing for businesses in Ghana. The GRR's composition consists of three main components: the Monetary Policy Rate (MPR), the interbank rate (IBR), and the reserve-adjusted 91-day Treasury bill rate (T₉₁). These components are weighted at 40%, 20%, and 40%, respectively.
While the central bank's policy signal (MPR) and the interbank rate (IBR) are straightforward, the Treasury bill rate (T₉₁) carries more weight due to the reserve adjustment process. This adjustment increases the sensitivity of the GRR to changes in Treasury bill rates. The main concern is that the GRR should reflect banks' deposit costs more accurately, rather than relying on a mix of policy signals and government borrowing rates. This would provide borrowers with a more precise understanding of the interest rates they pay.
Written by urgent.news from MyJoyOnline Ghana's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
