Bokpin Questions High Lending Rates Despite Inflation Falling to 3.8%

Economist Professor Godfred Bokpin has questioned why borrowing costs in Ghana remain elevated even as inflation has dropped sharply to 3.8 percent, describing the widening gap between price stability and interest rates as increasingly difficult to defend.

Although the Bank of Ghana recently reduced its policy rate by 250 basis points to 15.5 percent, Prof. Bokpin noted that real interest rates remain unusually high compared to current inflation levels.

In an interview, he argued that the disconnect suggests financial institutions are slow to pass on macroeconomic improvements to businesses and households.

“When you place the policy rate of 15.5 percent alongside inflation of 3.8 percent, the real return is excessively wide. That is not normal in a functioning macroeconomic environment,” he stated.

He stressed that interest rates, like other economic indicators such as inflation and exchange rates, should respond to improving conditions.

“Once inflation drops significantly, key macro prices — including the policy rate, Ghana Reference Rate and commercial lending rates — should also decline,” he explained.

Prof. Bokpin warned that keeping borrowing costs high could restrict credit access, slow private-sector expansion, and weaken overall economic growth, particularly at a time when the country needs strong investment to drive recovery.

He further cautioned that prolonged high real interest rates could erode public trust in official inflation data.

“If key rates fail to respond, people may begin to question the credibility of the inflation figures themselves,” he added.