BoG's New cash reserve ratio | Beyond the Numbers (29-5-26)

本站添加: 2026-06-01

[00:00:05]was bought mainly in 2023 and 2024. When prices were relatively lower.

[00:00:11]By 2025, prices had increased. So, when the bank sold it, it made 9.57 billion Ghana cedis in profit.

[00:00:20]And there's also the savings jar effect.

[00:00:22]Past gains from rising gold prices that were not actually recorded immediately.

[00:00:28]When the gold was sold, those gains were released, adding 7.99 billion Ghana cedis.

[00:00:34]So, in total, gold delivered 17.56 billion Ghana cedis in relief. Without it, the loss jumped to 33.19 billion Ghana cedis.

[00:00:44]So, now, what was actually driving the losses underneath? 16.73 billion Ghana cedis open market operations. This is the bank paying commercial banks to hold onto excess cedis instead of lending them out.

[00:00:58]It's a standard tool used to reduce money in circulation in the economy, just to cool down inflation. But in 2025, it came at a very high cost, and that's 16.73 billion Ghana cedis.

[00:01:12]9.05 billion Ghana cedis from other gold program losses.

[00:01:16]These are trading and operational losses outside the main gold sale, including the wind down of gold for oil program.

[00:01:24]The exchange rate, 5.47 billion Ghana cedis stronger cedi impact. The cedi moved from 14.7 Ghana cedis to 10 cedis 45 pesewas per dollar.

[00:01:35]That sounds positive, but only for importers.

[00:01:38]Here's the issue, the bank actually holds a lot of its assets in dollar terms. So, when the cedi strengthens, these dollar assets lose value when converted back into cedi, leading to 5.47 billion Ghana cedis loss. 3.29 billion Ghana cedis from personnel costs.

[00:01:56]Staff costs increased significantly, driven by a rise in employee numbers.

[00:02:01]>> Just note that gold didn't solve the problem. It actually just absorbed the shock.

[00:02:07]>> And without that gold intervention, the bank's 2025 financial position would have been far worse.

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[00:03:38]>> [music] >> It's another Friday we're bringing you Beyond the Numbers, and today we are tonight we have a lot on our plates. In fact, uh we've got a lot of big analysis. We've got two top coming for you on our headlines, but we'll focus on the cash reserve uh you know, ratio that the Bank of Ghana has increased [music] and has decided to make it uniform across board. We'll be picking the thoughts of a banking consultant, Dr. Richmond Atuahene, who'll join us on big analysis as we [music] break this down. We're asking a very simple question.

[00:04:13]What will be the impact of on banks and are they even ready to absorb this new directive from the Bank of Ghana? We understand [music] that this week there was some sort of a crisis meeting between the Association of Banks [music] and the Bank of Ghana uh to look at the new policy rate [music] or how the Bank of Ghana decided to hold the policy rate and the new directive that came with the uh the monetary policy rate [music] announcement. But, even before we get into our big analysis, we've got some top stories coming for you [music] in our headlines, Emma.

[00:04:43]>> Yes, so we start with the uh message from the Finance Minister [music] concerning the Accra-Kumasi Expressway. You know, that road is really bad. And the government, initially we thought was going to go in for to borrow to fix [music] that particular road, but he says that looking at the mineral and oil revenues, we could actually tap into that and then fix the road for the people who use the road daily. Uh so, some 4.5 billion uh dollars getting those monies from oil revenues and then mineral revenues, >> [music] >> that would help uh the government not borrow, but rely on what we are producing or what we are getting as a country to be able to fix the road.

[00:05:25]>> Well, so initially when the the big push [music] project was announced, we didn't really get the indication of the Accra-Kumasi Expressway. It was in the 2026 budget that the Finance Minister made that revelation, and everybody was [music] asking the big question, where is government going to get that money to fund it?

[00:05:41]But, when the the the Finance Minister was speaking at the Ishmael Yamson and [music] Associates uh you know, round table, He made an important revelation that well, we are not going to borrow to fund this project because [music] we've done the assessment. And what we have realized is that for instance, last year government got about 500 million dollars from you know, minerals royalties and [music] then also from petroleum combined is about 1 billion. And they made some directive in terms of [music] how meth can even do their investment. The finance minister says, "No, I'm not going to allow you to buy my own T-bills with that kind of money. I need that money to invest in the Accra you know, Kumasi express road. He says that granted that even that project cost about 4 billion US dollars.

[00:06:25]He believes that what we will raise from minerals [music] and petroleum revenue will be enough to fund the Accra you know, Kumasi express road. But the big question we are all asking is that we all know that the [music] petroleum revenue either to wasn't only used for infrastructure project. It was spread across board. But the three years is [music] just exactly. The education was in that quadrant. And the finance minister says, "Well, we are going to spend that on a legacy project which we are going to name it the Accra Kumasi express road." So, the big question is, "If you're going to spend all that money on that, what happens to [music] the other areas that the allocation used to go, right? Do we have have we made provisions [music] for those areas and in terms of you know, revenues because we understand that even this year last year we missed our revenue targets, right? Total revenue target for the year 2025. [music] But we've we've gotten some indication that this year things have improved, right? If you listen to the GRA with the the rolling or the coming on board of the digital [music] system and AI system, they believe that they are on track to be raising much higher than the anticipated or they got last year. So, possibly that could be one of the ways that we could you know, plug that loophole or close that gap. But the finance minister [music] has made a big revelation that what we are going to get from both the petroleum and minerals [music] revenue, we are going to invest that.

[00:07:50]But another aspect that we we have to analyze uh is the the fact that well, if we see [music] both uh you know, gold and and petroleum um Jemima, for instance, we are getting a lot of windfalls from from petroleum because we began the year with [music] a crude oil per barrel um um price of about $75 per barrel. Now, we know because of the war it was above $100 for a number of [music] you know, weeks and months, and now we are talking about 95 and 98. That is a big windfall for the country. So, if the finance minister is talking about we being able to fund it, you should know that he's talking about some of those windfalls [music] that's actually contributed to that. If you look at the gold space, for instance, we used to operate [music] a 5% flat rate on royalties. Now, we've managed [music] to introduce the sliding scale, which enables us to charge between 5 and 12% depending on where gold prices are. And we know that gold prices still remain [music] elevated, which means we can get to charge between 10 to 12% currently. That in itself is a big improvement in [music] the revenues we used to get from gold. And so, if he says that well, we are not going to borrow, we can fund that using moneys coming from this space. That should tell you that he is the same Obibima Twumasi, which means well, he's got he's got his legs on on something, and that's why he he's a bit confident [music] that we will not borrow, but we'll be able to use moneys from uh the infrastr- I mean, from both petroleum and [music] gold space to actually fund this project.

[00:09:22]>> I'm I'm quite excited about the fact that we don't we don't have to borrow um to be able to fix that particular road.

[00:09:31]Um but looking at the revenues that we are getting from within the country, and then to do that. Um if we borrow, it's also going to add to our debt stock, and then we we see that [music] rising. But, looking at the how gold is performing on the international market, perhaps that's why he he says that's a safer option, or that's a better option than to borrow.

[00:09:53]And also, in terms of the windfall we are getting because of the um Iran, or the war in the Middle East. Uh is it strong enough? I'm I mean, these [music] legs that we are standing on to be able to make these projections. Very strong enough, because we don't know what would happen in on the international market [music] in in in some few weeks or months to come.

[00:10:14]Are we standing on a strong footing?

[00:10:16]>> Well, the stochastic process shows that currently we do have a strong footing.

[00:10:20]>> Mhm.

[00:10:21]>> But, this is subject to global prices, and we know how commodities can make and un-make you.

[00:10:26]>> Right.

[00:10:27]>> We all saw the story of cocoa, and how that actually made it difficult for farmers [music] to get what they they had agreed at the beginning of the season.

[00:10:34]>> Mhm.

[00:10:34]>> And so, I'm a bit, you know, risk averse [music] when it comes to having that level of confidence based on commodity prices, because it can fail you at [music] every point in time. But, I think that the sliding scale in itself, whatever whether gold falls or not, we will still be able [music] to get more than we used to get from uh gold royalties or mineral royalties. And remember that there's a coming on board of lithium, for instance. [music] That is also going to help. But, one place that I'm not so confident is the petroleum revenue, because we all know how the space is volatile. If the war should end now, trust me, prices can [music] fall as low as, you know, $80 per barrel. And what happens to our projections? What happens to uh you know, the the projections that the finance [music] minister may has made.

[00:11:19]If you look at the entire big portion itself, it will need more than four or three billion dollars to actually complete almost all the projects that we've actually envisaged for the big push. So, definitely, [music] there will be some level of borrowing, especially with the with the with the fact that we have decided [music] to construct a new express road connecting Accra and Kumasi. That in itself adds a lot of cost to the big push. There will be for me, I think that there will be some level of borrowing, especially in the infrastructure [music] bonds. But maybe they will not be as huge as maybe anticipated in 2024.

[00:11:51]>> Mhm. And speaking about the Middle East crisis [music] and how it's affecting um the prices of oil on the international markets, [music] we know that the NPA has increased the price floor because somewhere on Monday, um we actually going to see the increase in uh fuel prices.

[00:12:11]Uh Interesting. 92.5 um dollars per barrel on international markets. I mean, I'm wondering how Ghanaians uh are feeling now because as and as and when the days go by, we see these changes. Um to some points, we see or hear that um Iran wants to reach a deal or the US wants to have a deal with the US to cease fire, but there's nothing setting at the moment and so we see these the prices fluctuate as and when.

[00:12:43]>> I think that the most unstable, you know, variable in this whole geopolitical game that is being played is is a ceasefire which it that's is not really constant at all. It changes as and when who says what, right? But looking at the fact that we are around 92.5 and this happens this this week, right? We used to be above $100 per barrel and that is why fuel prices are expected to go up at the pumps. And this is why I tell you that there's a lot of fluctuations in this space which makes modeling very, very difficult where you think that the price is going to be. But we are beginning to feel the impact, right? And it's not only affecting the price at the pumps and I said that the reason why the beginning we weren't really feeling the pinch at the pumps was that when the prices were increasing, we had a very stable CD.

[00:13:32]Currently, you see the CD also depreciating. So, that coupled with the international benchmark prices will fetch you higher prices at the pumps.

[00:13:42]And that is why we we've seen consecutive, you know, increment in the price flow, I think since, you know, February. You see it's coming up consistently since the war began. And we can also confirm to you that we are currently above the price, you know, uh um um where the price used to be when this government took over in 2024 to January 2025. Now, we are talking about more than 15 CDs for petrol, more than 15 CDs for diesel. And one other, you know, fuel price that worries me a lot that we don't usually talk about is LPG.

[00:14:16]>> Right.

[00:14:16]>> LPG is currently above 13 CDs per kilo. And that is even the price floor. We all know how margins are hefty in the LPG space, which means that those of us who fill about 12 kilos in our homes and we are spending close about 130, you know, CDs at the beginning of the year. Now, you spend close about 190, close about 200 CDs to fill your 12 kilo, you know, gas or cylinder. And that is also one cost that or one energy that we need to you need to take a a look at in. So, it's not just about the the the fuel that is going into our vehicles, but if you are coming into the homes, the the the effects in the Middle East that's coming from the Middle East or the heat that's coming from the Middle East you are beginning to feel it. We are beginning to even feel that in the inflation numbers where for the first time in a long time we are seeing inflation go up significantly, the Bank of Ghana decided that, well, because of the war going on in the Middle East, we are beginning to to to say that, well, let's look at what is going on, hold the rate, and see what [music] what what is going to happen possibly in the future.

[00:15:17]>> Right. Uh away from that, uh President Mahama has always been calling on the international community to come into the country to invest that Ghana is ready for business. We are hearing from GIPC that FDI inflows jumped from in 2024 somewhere 652 million dollars to 2.61 billion dollars. Huge margin.

[00:15:42]>> Yeah, in fact, I'm not surprised because if you look at our president Mahama was all over the world telling everybody that Ghana was is is is open for business once again. I remember that when gold prices begin to go up, everybody is looking for the country that actually produces gold. And we are the number one producer of gold in Africa. If you look at where these numbers are coming from, the free zones area is a key component of that. But definitely if we are beginning to see the call that the president made for the petroleum space also coming up, we are likely to see these numbers going up significantly. But I believe that the call that the president made right at the beginning of 2025 that we are open for business again has made the investor community know that well, Ghana is open for business. And almost everything that looks attractive at the moment, we are enjoying single digit inflation, CDs relatively stable, >> Interest rates low.

[00:16:34]>> rates very low. And in fact, if you look at the war going on, we have not really felt it like the way other countries are beginning to feel.

[00:16:43]The president says that we have what it takes to now absorb the shocks. That in itself is some level of confidence for investors. And that for me is the reason why we saw in 2025 this huge jump in terms of FDI. I believe that in 2026 it could be more.

[00:16:59]>> Mhm. Especially when we know that now we are on our own, the IMF has exited even though we're on its PCI plan. Um things look good relatively, so we are expecting more in 2026.

[00:17:10]>> Absolutely. With the IMF in the [music] boat, with a PCI, you know, coming along with a PCI, it still gives investors that level of confidence that Ghana will remain disciplined in terms [music] of its fiscal and some other policies. So, I believe that in 2026, we are likely to see about 3.8 in terms of the the inflows, right?

[00:17:30]>> So, these are top headlines for you. Uh stay with us. We'll be back with big analysis where Dr. Richmond Atuahene, [music] banking consultant, will join us. We are discussing the cash, you know, reserve ratio that has been raised by the Bank of Ghana and how uniform they want it to be. We are analyzing its impacts on the banking sector.

[00:17:48]Uh Winston Tackie and Caleb Zebulum will also join this conversation. Stay with us. [music] We'll be right back.

[00:17:59]>> [music] [music] >> The latest forecast suggested that inflation is expected to trend upward into the medium-term target band, largely due to base drift effects related to exchange rate movements, food supply conditions, and transport fares.

[00:18:26]Outside risks to the inflation outlook included the product protracted Middle East crisis, which could keep crude oil prices above $100 per barrel, and raise the prospect of petroleum price pass-through into domestic transport and utility costs.

[00:18:46]The quarterly adjustment mechanism for utility tariffs could exert upward pressure on non-food inflation in the coming months.

[00:18:55]But, however, relative exchange rate stability, increasing reserve buffers, and continued fiscal discipline are expected to help moderate these upside risks.

[00:19:08]Based on the above considerations, the committee assessed risks in the outlook to inflation and growth as broadly balanced and decided decided to maintain the monetary policy rate at 14.0%.

[00:19:24]The committee will continue to monitor incoming data in particular relating to potential spillover of the geopolitical tensions to the domestic economy and take appropriate policy actions when necessary.

[00:19:39]The committee took yet another an additional measure.

[00:19:43]The committee decided to amend the dynamic cash reserve ratio to a uniform ratio of 20% maintained in the domestic currency effective June 4, 2026.

[00:20:00]>> Back to Beyond the Numbers and this is the big analysis and this time round we're going straight to the Central Bank introducing a new policy. Basically, 20% of banks' financials will be at the Central Bank ordered as a new cash reserve ratio policy and this is where we're going to analyze its implication on Ghana's financial sector. I will be speaking with Kofi Dj and Caleb Sibidim and we want to understand how this is going to transform the sector amidst the intention of the Central Bank especially controlling liquidity in the system.

[00:20:34]Also, its implication on the forest market. First of all, we want to understand the whole agenda especially how it came by. Let me start with the numbers on the screen. We're going to go straight to the assessment. So, when the conversation began at the MPC meeting, what were the initial intention that was proposed by the governor?

[00:20:55]>> And yes, so we'll hear from the governor shortly but then you know, before the cash reserve ratio was you know, modified, we used to have a tiered system where depending on how much or how your loan book is or how much you give out to the market in loans, your reserve ratio is reduced. So, if you give out more loans, you have less reserve ratio, and then you can effectively give out more loans, or you know, have more liquidity to invest in securities, and then you make investments, and make interest on it. On So, just a very simple In a very simple matter, the reserve ratio means that whenever a bank takes a deposit from a customer, the bank has to keep a portion of that money with the central bank, and the bank cannot use that money for anything. They can't invest it. Can't give it out as loans or anything. This is the thinking is that once the [snorts] bank has some of the a part of the deposits with the central bank, if there should be a bank run, or where everyone decide that they have to go and take their money from that particular bank, that commercial bank >> Sorry.

[00:21:52]>> that commercial bank can fall on the money left with the Bank of Ghana, and also serves as a sort of, you know, confidence within the market that a portion of your funds are left with the central bank. So, if there's anything, you know, you should know that a part of it can be recovered. So, I think that's the main understanding of the reserve ratio, the main understanding of the reserve ratio. Now, before we have the 20% uniform rule, the BOG, so, we can go back to 2024, the BOG linked it in 2024 to your deposits. So, like I said earlier, if you have more deposits, or sorry, more loans, that you are giving out more loans, if about 40% or 30% of your books are loans, you have a less reserve ratio at the Bank of Ghana. If you have less, means that you have more money, the bank has more money to give out as loans, or make investments. So, the lower the reserve ratio is, the better for the bank, because they have more cash to do as they please. In 2025, the BOG, that's when this new administration came in, they shifted the CRR rule, where they said that your reserve ratio should be match the currency. So, for instance, if say I go to the bank and I deposit 100 Ghana cedis, about 20 cedis will be as will be left with the central bank as a reserve. And if you go to the bank of Ghana or if you go to the commercial bank and deposit 100 dollars, 20 dollars will now be kept as a reserve with the central bank. 20 dollars. That's the emphasis on 20 dollars. But now the new rule is that it doesn't have to be held in the currency that you deposited in.

[00:23:21]So for instance, if I deposit 100 cedis, 20 cedis is with the central bank. If you deposited 100 dollars, it's not 20 dollars that are going to be with the central bank. It's going to be the cedi equivalent of 20 dollars. So at this current exchange rate it's about maybe uh it's a little over 200 Ghana cedis.

[00:23:36]This means that central banks will now be more exposed Sorry, commercial banks will now be more exposed to exchange rate volatilities. I think we'll get into the implications later on. So this is how the CRR has changed since 2024.

[00:23:48]First, we used to do it based on your loan book. If you give out more loans, your CRR is less, which means that banks have more liquidity in their system.

[00:23:55]They can give out more loans. If they give out more loans or they can do more investments. So banks are at liberty to do as they please when they are giving out more loans.

[00:24:03]>> All right.

[00:24:04]>> That was my point.

[00:24:04]>> We'll come back to that very shortly.

[00:24:06]Now Kofi, the central bank since the new governor came into office, he's been introducing regulation upon regulation directive to the financial sector. The intention is to ensure the margins are tightened, the fundamentals creating the conducive environment for the financial sector to grow, including you know, the ensuring the inflation has come to a very targeted margin. We've seen the policy rate drop consistently and consecutively we've seen adjustment in the reference rate as well. But I want to understand from you after having done all these works, is that the right time, looking at the number of years, for the central bank to implicate or possibly introduce this policy? And what impact will it have in the immediate to long term? Because we know the banks have already had the ad dark shadow, the dark moment, including the DDEP and all that.

[00:25:00]Is that the right time?

[00:25:01]>> Well, in fact, we I need to put across that we are still trying to connect to Dr. Richmond Atuahene, a banking consultant. Yeah, he will join us here.

[00:25:08]We have him now. He will join us uh to give us a perspective also. He's written extensively about this. But, um great question that you asked. In terms of being the right time, I think that they the bank has done its own assessment. And as the governor will always say, look at the data, right? And if you look at the [clears throat] data, currently what you see is that when your monetary policy rate begins to come down in that level of, you know, magnitude to 14%, you should know that banks will have been a position to lend.

[00:25:43]And then also customers will be in a position to be able to to to afford loans, right? So, people will go to banks because the the the ratios or the the the interest rate is low. They'll go to the banks and say that I want a loan because the the I mean, the interest rate is low.

[00:25:58]When that happens and you don't check certain things, that in itself can lead to inflation.

[00:26:04]Because once a lot of people begin to go to the banks to get money, I mean, we all know the definition of inflation, especially the other side, when more money begin to chase after less goods, where we've not been able to fix the production aspect of the economy, definitely with um you know, with that aggressive policy rates uh cut that we did, it was simply going to lead to inflation at a point. That is why the bank believes that currently it is important that, you know, banks keep about 20% of their the money the deposits they get, you know, with the banks.

[00:26:37]But, one thing that has changed is the fact that now I mean, this was I think this was done somewhere in 2024 as well.

[00:26:43]And Dr. Atuahene wrote extensively about it also. And around that time, the exchange rate volatilities were high.

[00:26:50]And banks were asked to, you know, convert their their foreign exchange, you know, reserve into the local currency and the part of it being kept at the at the central bank. When you see a central bank beginning to go on this tangent, it means that they are not only targeting inflation, but they are also targeting exchange rates.

[00:27:10]>> Yeah.

[00:27:11]>> Because when as a bank you are asked to keep a certain component of whatever that you have with the central bank in uniform with how you do it with your local currency. It simply means that the central bank believes that there is some level of, you know, foreign currency in the space that they believe is driving the exchange rate at this point. And that's also a one way of checking the exchange rate without coming to the market to intervene. And when central banks begin to go on this tangent, it makes it expensive for commercial banks to keep exchange rates.

[00:27:43]>> Yeah.

[00:27:44]>> That is why Dr. Gideon Boako wrote that if we begin to roll out this new CRR, banks will begin to reject uh, you know, foreign currencies. He didn't say that out of the vacuum because the math is clear, the mechanisms are clear that if you go on this route, it is much more expensive for banks to keep their foreign currencies because you are required to send a component of that to the Bank of Ghana.

[00:28:10]>> The cedis.

[00:28:10]>> In cedis. So, imagine that as you do that conversion, and the the the what you're keeping with the bank loses value.

[00:28:18]How are you going to get that money to pay back, right? Because remember that's depositors' money.

[00:28:23]>> Yeah.

[00:28:23]>> And we also remember that the CRR is money kept at the central bank without interest.

[00:28:28]So, if you keep it with the central bank, it is not yielding any interest for you like the way Bank of Ghana comes to the market to do OMO that the banks can buy and then earn interest on it.

[00:28:38]This time around the CRR doesn't come with any form of interest, right? So, if you're keeping it with the bank, it doesn't come with any remuneration, right? It doesn't come with any form of, you know, additional money. When you're taking it, it's the same money that you kept at the bank. But because of how volatile the system is, banks will do their own calculation and realize that, well, if I begin to take more foreign currency deposits, I would have to pay more to the Bank of Ghana. And that in itself is risky for the bank.

[00:29:05]>> But it also that really depends on the Bank of Ghana's intermediation on this point. Because if there's availability of dollars from the BoG side and it comes to the market fairly quickly, the banks will not feel that impact as soon as possible. Because one of the BoG's >> But but we heard from the governor. He says that now we've stopped the inter- we stopped the how do you call it? The intervention, right? And we are not really seeing it like we we we saw it in 2025, where they used to come into the market almost about a billion dollars every month.

[00:29:35]>> No, the the BoG they No, they still do the intervention, but >> They're still doing it.

[00:29:39]>> Yeah, there's a program intervention.

[00:29:40]>> Exactly. Because of the the I mean, what we signed up with the IMF, but the fact that we have to be transparent with certain things.

[00:29:47]And remember that we are now building reserves.

[00:29:50]>> Yeah.

[00:29:50]>> 15 months of import cover. You need about 9.6 billion every year to be able to dollars to do that to rate that 15 months of import cover. So, you cannot come to the market to intervene like you used to do in 2025. So, what do you have to do is to make sure that you are best strategic in how you come to the market. Allow the market to play a bit, especially when you feel that it's within the band that you want it to be.

[00:30:12]You don't really come to the market to do >> Now, let's go straight and let Dr. Richmond Atuahene join us in this conversation. Doc, it's good to have you with us this evening possibly. Now, you've said about the new policy, written extensively on it as well. Want to get your initial understanding and what direction is it will you say this policy basically would nevertheless disfavor the banks.

[00:30:37]However, it is for the better good or a good?

[00:30:42]>> Well, thank you very much.

[00:30:44]I think this is not the first time we had this.

[00:30:47]If you check the literature on the 2012, we used to have this type of cash reserve ratio.

[00:30:55]Where all uh uh the cash or all these foreign currencies were consolidated in domestic uh accounting. And we had about I think that those days are 10% of their balance.

[00:31:08]But they basically the rationale for doing what Bank of Ghana has done is that because the current economic environment is stable and what we call the limited currency substitution, what it means is that people are not used in saving too much in the in the foreign currency as it used to be.

[00:31:28]Now the city is a bit attractive.

[00:31:30]So if you use the uh the denominating currency, it means that you're not going to hurt the industry.

[00:31:38]And also it also help to facilitate the administration of the complex liquidity management. You know, when you're keeping part in foreign currency, people have forgotten that.

[00:31:50]Even your balances in the nostro accounts have to be always made available to Bank of Ghana.

[00:31:56]And that is the point where they have to struggle to get these things. But if you put it them all in the cities, it means that it helps in liquidity management.

[00:32:06]To look at the inflation from uh banking perspective, where you'll be able to say that you are eliminating the mismatches. You know, when we say mismatches, if you are parting dollar and parting euro and parting yen and parting uh kwacha or South African rand, then the management becomes very difficult for the Central Bank and the bank itself.

[00:32:28]So Bank of Ghana having seen inflation going down, currency stability, where there is less uh substitution of currency, they decided to do what they have done today.

[00:32:39]So, basically, it is uh exchange rate management, especially liquidity management.

[00:32:45]When you anticipate that the bigger the reserves, the bigger you will be you hold it so that you can manage it.

[00:32:51]>> Mhm.

[00:32:51]>> And that is why Bank of Ghana has chosen this path. Because 2020 for 5, it decided to look at currency reserve and charge the ratios.

[00:33:02]But now he after 1 year, he have realized that there is less currency limited substitution, which is very, very important in management in managing of the currency. So, that is why they decided that we want to go this tangent.

[00:33:17]>> Okay. Now, you know, interestingly enough, we with this uh possibly this new policy by the Bank of Ghana, are we going to see banks entering or diversifying their investment, not just basically and giving it to uh private sector, but they themselves fund their projects >> Mhm.

[00:33:35]>> manage doing those projects to ensure the returns uh contribute to the overall outlook of their profitability?

[00:33:42]>> You know, anytime we talking about the banks not lending to the private sector, it is not only the CR or neither is it the policy rate.

[00:33:52]That other factors in it, especially we have a high non-performing ratio, I think the whole subregion.

[00:33:59]That is also inimical inimical to the management of currency. And people don't talk about this. You have 18% above.

[00:34:08]So, if you lock the 18 plus 20, it means you're locking nearly 40% of the deposit.

[00:34:15]So, what's what we should be doing is to improve on our non-performing to a certain level, say 10%. Whether the reserves will not hit as very hard.

[00:34:24]>> How do we do that, Prof?

[00:34:26]>> Yes, if you look at the country banks that with foreign deposit started Stop it, But now, because the the stability in the currency, the CD and the dollar, which is not as bad as it used to be, it's not going to be a much You see, we eliminate what we call the mismatch. And the mismatch was actually foreign exchange risk to those who were holding foreign exchange. So, I believe that Bank of Ghana hasn't done as Kofi said.

[00:34:50]They've done their work. They have done the calculation. They've done the stimulation. They've done the modeling.

[00:34:54]And realized after two one year, this is the way we should go to help the country to tackle the inflation. All these things that are tackling inflation.

[00:35:03]The The more we have more money achieved to the central bank, the more you have a more more money circulating. So, it's a strategy as part of the inflation targeting.

[00:35:13]>> Doc Doc [snorts] >> That is why the governor said that I'll be looking at the police rate.

[00:35:17]>> Mhm.

[00:35:18]>> He's going to look at it and look at the cash reserve for the next 3 months to see what they can do. So, that is what the reason why they do it.

[00:35:25]>> I I want I want us to listen to the governor, you know, give some level of explanation to this new uh you know, directive. And then we'll come back with more questions.

[00:35:35]>> You'll remember just about a year ago, we took a similar policy measure where we separated the provisioning for the two types of deposit accounts.

[00:35:45]Um down the road, a year after, the committee evaluated some of the incentives.

[00:35:51]Uh we think that it's about time we reviewed that uh considering the outcomes that we have we have observed.

[00:35:59]And in the wisdom of the committee, uh we think that this will go a long way to complement, you know, our open market operations. Remember, our objective is to maintain an appropriate, you know, policy stance, the so-called liquidity conditions. That's how we are able to impact on on on on our transmission. And so, in the wisdom of the committee, uh this additional measure uh was taken.

[00:36:26]>> [clears throat] >> Uh we have provided clear dates by which the policy takes effect.

[00:36:31]And also remember we meet the CEOs of banks immediately after MPC.

[00:36:38]>> Doc, 20% uniform, is that too high?

[00:36:42]>> Well, looking at where we were and where we have come from.

[00:36:47]And then looking at other variables, as I said, the non-performing.

[00:36:51]And if you want to tackle the inflation, I see the governance and this question of the global global risk of war and the oil. That's why he's been a bit cautious. Other than [snorts] that, at least if all things had been equal, I believe the cash reserve would have been even reduced to 15%.

[00:37:08]>> Yeah.

[00:37:08]>> Because it is this idea that it is this idea that private sector should have more funds to send the economy around.

[00:37:17]But however, looking at the geopolitics, the oil prices, your your colleague showed you $92 per barrel. It is quite unreasonable that if you don't take a inflation, we import it into this country. So it's about sterilization, currency sterilization. You sterilize what you have in order not to create inflation in the system and manage the liquidity. So I believe the governor is a bit he's in a bit dichotomy because the geopolitics is not allowing him to do actually what he should do. If the If the oil prices has gone down to say 70, 60, I believe I believe he would have reduced it to about 15%.

[00:37:56]>> Doc Doc, you speak about sterilization.

[00:37:59]We've seen the 2025 report of the of the Bank of Ghana. And what we have seen is how expensive sterilization in 2025, OMO operation in 2025 was. And that contributed significantly to the loss on the bank's books. If you look at this new approach, do you think that it's another way of, you know, sterilizing without having to bear significant cost in terms of the interest paid to banks.

[00:38:26]>> Cuz relatively this is this is this is more free free, right?

[00:38:29]>> you that.

[00:38:30]The OMO would have you slow down. And the instead of going through the OMO way, he will use you using the cash reserve.

[00:38:37]It's another way you sterilize it. He's not going to go aggressively in the OMO market. But what he's going to do is that he is going to as he has elevated the cash reserve, it means he is also getting a lot of money out of the system. So that the cost of the cost that we saw in the OMO is not going to be the same thing because he is using the cash reserve to get it is out of the system. That is you know you have the OMO and you have the cash reserve. These are monetary policies tools that you use. These are some of the monetary tools. If you don't use this, use that one. And I believe they have looked at the cash reserve over the years and realized that if we can slow the OMO by not we will not be incurring that cost, we can use the cash reserve. That was is almost a free money that is with us. Free money to the Central Bank as it is. So it's another strategy which he has used.

[00:39:31]>> Well, as they say, there's there's no free lunch in the >> Exactly. Well, like Doc said, there's actually no free lunch. And one thing I've seen consistently from every government that has come to power in the first year and a half, they will do these foundations that they call "We about to take off." Everybody feels like we about to take flight. The economy is about to boom. And you hear the conversation from the president, the finance minister, all of them looking forward to ensuring that now that we have the numbers, let's translate it into economic growth. Let's translate into job creation. Let's ensure the private sector is booming. This approach by the Central Bank basically seems to be a cycle an opportunity cost in the sense that now we're going to see more tightening in the financial sector as against economic expansion. When we talk about expansion, the president yesterday at the CEO summit reiterated the fact that they need public private partnership and the private sector need access to cheaper capital and access to funding. Now, with the banks being constrained at this point, with them now the cost of borrowing is going to go high. Then the the amount of money the banks have at their disposal, you will have to have a very formidable profitable venture. They may not give you a long term because now they have to show the turnaround is quick.

[00:40:49]They have to show that the kind of investment is secure. Their risk assessment is going to be high and all these basically ensuring that they are they are non uh their MPL is low. So, they are going to be cautious because if you look at last year to now, all the banks, if you look consistently, they've been recording profitability. And we are uh we are quite cautiously optimistic that this year is going to look better. We've analyzed some of their financials here on Beyond the Numbers and with this new trajectory, I'm quite sure banks will be quite marginal. They'll be quite controlled in their projection going into the end of the year.

[00:41:28]>> And I think so, Philip.

[00:41:29]>> And just to follow up on what Winston said, you know, this kind of shows that the central bank is action is is acting, sorry, fairly independent from the governor from the government at this point because from this new CRR move, it's effectively tightening liquidity in the sector. It's preventing banks from you know, loaning uh to the public to the private sector more freely as they could have in the past because again, one now that you've changed the tier system, the banks that give out more loans that had more liquidity, now their liquidity has tightened meaning that they can't give out more loans as they could have in the past. So, again, so this points the fact that maybe the BOE is actually acting fairly independent from the governor from the government at this point because again, if they cannot give out more loans or because of the 20% CRR uniformity at this moment. Giving out more loans is going to be fairly difficult for the banks at this stage.

[00:42:17]Again, we already know about how the higher NPOs are performing at this moment. So, again, banks are already very you know, sensitive when it comes out to giving out loans freely because of the higher NPO at this moment. And again, if you come to the government security side of things, at this point, the treasury bills about 4.something% for them.

[00:42:37]>> Yeah.

[00:42:38]>> It's not liquid at this moment. So, I think we understanding from the central bank's perspective, the first thing we need to understand is why they actually changed this move. Did the evidence from the past year show that even though there was a tier system, banks were still very risk-averse and they were not giving out loans as much, which is why the BOG decided to bring the the uniformity rule across board for all the all the commercial banks to follow by. And I think this also brings us with different conversation of understanding whether maybe it's time to scrap the entire cash reserve ratio. But then, I think the BOG likes this because and you made this point earlier where >> them in control.

[00:43:14]>> Exactly, because if you are using the MPR, the monetary policy the policy rates to do some of the liquidity measures, >> OMO operations.

[00:43:21]>> It's it's an expense for the Bank of Ghana. Last year, they made almost 17 billion in losses because of the OMO operations. And because of the way the geopolitics is at the moment, inflation is projected to go up. Inflation went up last month by about 0.2% from 3.2 to 3.4% and that's even without the transmission effect taking full effect because at the time the you know, inflation is backward data. So, at the time that the last inflation data was compiled, the full effects of the Israel war and then the higher petrol prices and diesel prices on the market didn't really translate into higher prices within the Ghanaian >> governor governor said now we have the the shock absorbers. Yesterday at the CEO summit, he said that is the reason why we decided to build enough reserves.

[00:44:04]So, he said the reserve basically ensured the hit was not as much as we >> how reserves can actually be depleted within just a matter of weeks and months if your currency is not able to >> But if that if that is your comfort zone, then you have confidence enough to keep reiterating that because if you look at his narrative, he's been consistent saying the reserve is reserved.

[00:44:26]>> No, so I think if if you look at the exchange rates again side of things, once they are tightening things at the commercial banks, it means that there's less cedis in the system. Once there's less, importers will not have easy loans to go and sit there and post more things which puts pressure on the currency and makes your exchange rates, you know, fall down a bit. And again, this is a season where we are seeing so much demand on the for the dollar. You know, that's why we are seeing the that's very early. When the governor spoke, he said some people some of the importers are starting to import their things earlier than they, you know, the June period that they are used to. Again, because of the the war in the Middle East, energy prices have gone up. Last year on average, we're doing about 400 billion 400 million cedis every month for petrol imports. This year because of the elevated prices, we're doing 500 million. So that's 100 million 100 million dollars every month in addition to what we used to in the past. So again, if you want to control your currency stability and then eventually inflation because, you know, if the exchange rate almost takes almost 50% of Ghana's inflation rate. If you want to control that, you have to control supply of cedis in the economy. And if you do not want to incur so much cost through the policy rates as we saw last year, you can do that through the >> But but also if you don't take time, right, and you introduce this uniform CRR, it means banks will begin to sometimes be a bit cautious in the amount of dollar reserves they have.

[00:45:47]Exactly. When that happens, we all know if importers go to bank and they are not getting the forex, where will they go to? They'll go to the black market.

[00:45:54]>> And already the BoG has implemented a policy where you cannot withdraw dollars that you don't deposit.

[00:45:58]>> Exactly. So so so that in itself is although, I mean, they've done all the math and all of that. But, there's also the opportunity cost aspect, the disadvantage to this whole new policy, which I believe that the the mechanism that BOG or the mechanics that they did shows that well, they will be on the on the gaining side. Because the projection is that with this new CRR, they will be able to mop up about 16 billion, which is about 1.2 which is about 1.2 or 1.3 billion US dollars without having to pay that huge cost they used to pay when they are using OMO operations, right?

[00:46:32]>> to add to that >> are we saying that now based on your analysis, now it seems as if the Central Bank is now a player in the financial space.

[00:46:40]>> Okay, wait. And just to add to what >> It has always been a player, right? A key player instead of a referee.

[00:46:45]>> now they they have they have control.

[00:46:46]>> Yes.

[00:46:47]>> Right? And I just wanted to add that >> If you look at some of the the OMO operation that they did last year, down the line they'll be maturing and the Central Bank will have to give >> They have to pay.

[00:46:56]>> the the cash back to the commercial banks. When you give the cash back to the commercial banks, you're increasing liquidity in the system.

[00:47:01]>> So, that's why they're finding a way to mop it up, right?

[00:47:03]>> Exactly. You guys have made a very good point. Let's bring Let's bring Dr. Cham.

[00:47:06]>> No, no, no.

[00:47:07]>> [clears throat] >> One last point. And one last point.

[00:47:09]>> 30 seconds.

[00:47:10]>> [laughter] >> You you OMO operations last year cost about 17 billion. This new CRR will will will help you mop up 16 billion.

[00:47:19]>> And if you do the net effect, it's almost about zero, right?

[00:47:22]>> Just add to that.

[00:47:23]>> Let him Let him learn.

[00:47:24]>> Let him learn. Let him learn.

[00:47:26]>> The BOG mopped up about 60 billion from the commercial banks through its open market operations.

[00:47:31]>> Yes, but the cost was about 17.

[00:47:33]And you are taking free money from the system and you are taking about 16 billion.

[00:47:37]>> Yeah.

[00:47:38]>> So, give the banks 17 billion, you take 16 billion, the net is about just 1 billion or if you do the math or possibly this is is the net is zero. So, that in itself is a strategic uh you know sort of policy that the Bank of Ghana is >> Doc, you've you've heard the gentleman.

[00:47:53]Now the debate here is getting hotter.

[00:47:56]But, I want to get your assessment as well.

[00:47:58]>> [snorts] >> I think I think the debate is quite interesting.

[00:48:02]Each of you is making a very valid point because you see the CRR, as you said, it limits the bank's ability to give money. But, the question is that that is not the only variable.

[00:48:13]>> Yeah.

[00:48:13]>> I think all along we keep on forgetting about the non-performing.

[00:48:17]Non-performing has consistently more than 20% or 18% over the last 10 years.

[00:48:24]Meaning that for every hundred cedis that goes in, 18 goes back.

[00:48:29]Until the Until the minister of begins to pay the contractors and the IPPs with this 18%, even if you put the CRR at 10, it's not going to be easy to lend.

[00:48:42]Because everybody is treading cautiously that if I give too money to a contractor to construct a road, I am not going to get paid today.

[00:48:50]And because of that banks are very cautious. And it's good for them that now they cannot also go to treasury bills because treasury bills are as low as anything.

[00:48:59]So, they will need to lend strategically >> Yeah.

[00:49:02]>> to companies and businesses that will pay back.

[00:49:06]And don't forget >> Doc, will you say this approach is rather putting >> rate plus the margin on it.

[00:49:11]>> All right.

[00:49:12]>> In the subregion, there's no place apart from Nigeria. Ivory Coast does about 7%, 8%. And we are doing about 19.2% on lending.

[00:49:21]So, I mean, the environment needs to be clean very well.

[00:49:26]Not because the policy rate is very high, reasonably high at 14% and then you go to Ivory Coast, it is too lower.

[00:49:34]And because of that the banks will add a margin. And if they do the margin and you're talking about 19, 18% lending.

[00:49:41]>> Doc, Doc, Doc >> Which business would you do to pay that?

[00:49:43]>> Yeah, I I I know that the literature says that if your non-performing loan is about 10%, it shows some level of crisis. With ours currently being about 20% and with this new CRR, how do you think the banks would take it? What would be the impact on the commercial banks? Are they going to take it, you know, >> They will They will be >> What will be the impact?

[00:50:03]>> They will be cautious in lending still.

[00:50:06]Because, you see, if you've given money and it [snorts] hasn't come back, why do you want to give more money to it?

[00:50:11]Then you begin to play around the treasury with 6% and 5% 5% and if possible go and buy some of the government bonds and keep it 12%. That will help you to make profit. They will never go into the lending aspect.

[00:50:24]Except they will do it to your normal client. Not everybody go in there. So, the non-performing the two dichotomy between ours and the high and non-performing correlates with correlates with government not paying debts. All is outstanding debts.

[00:50:40]>> And doc >> If government were to be able to settle the ITPS and contractors if you read them by the finance minister, he said they were owing 47 billion and they have just paid about 12. And that 12 that that 12 billion is sitting on the books of the bank.

[00:50:54]>> And we have more coming up through the big ones where Yeah.

[00:50:58]>> So, they are not just lending because the the policy rate is high or not because you don't they don't want to go there.

[00:51:04]So, we need to work on this, clean up these things. The finance minister must be aggressive in paying some of these contractors so that that can bring in money for the banks to lend.

[00:51:13]>> Okay. And doc, I wanted to ask you >> keep 20%. If I keep 20% and 18 is bad, why do I want to go there again?

[00:51:21]>> And doc, before we let you go, if you look at some of the uh more advanced economies, they've moved away from having a CRR altogether and they focus more on deeper uh you know, financial institutions. And like you said, majority of the problem also comes from the fiscal side because if you do not pay the banks on time or if you do not, you know, release the funds to the contractors, the financial institution in the first place will be very risk averse. Do you think it's time that we look we have a holistic look at the entire uh you know system and probably take out the cash reserve ratio.

[00:51:53]>> Well, you know the cash reserve ratio is not only for is for liquidity management and prudential requirement.

[00:52:00]And even if I can tell you if you go to countries like South Africa is 2.5.

[00:52:05]If you go to Tanzania is 10%. If you go to Kenya is about 5%. Every country has got his own cash reserve ratio because as you said it helps us as a buffer if there is any crisis. That is the first point you go for the money. If you strike you take it off then it means the banks are naked.

[00:52:24]They are naked means that when they go and lend bad money and they give bad loans and they go who your depositors cannot even be paid 10%. So it is money for prudential management and at the same time liquidity. It is not only the liquidity. Which is the buffer for the banks.

[00:52:41]>> I think Doc made an important point.

[00:52:43]>> They have it all over the place.

[00:52:45]>> Yeah.

[00:52:45]>> our problem here is that government has given contracts with contracts and some of them have not been paid for for about 7 years.

[00:52:52]>> Yeah, Doc.

[00:52:53]>> Thank you very much. If you haven't paid somebody then >> you you make you make an you make an important point about why we cannot do away with the CRR because within a span of about 16 years or 12 years we've done banking sector clean up. We've done DDEP.

[00:53:10]Imagine we didn't have the cash reserve ratio. What would we have done, right? So the reason why our cash reserve ratio is currently high around 20% is because of the risks in our banking sector. The banking sector needs that sort of cushion in time of crisis because I mean you can't have two crisis in a span of about a decade and decide to scrap the cash reserve ratio. Look at the banking sector clean up that was done.

[00:53:36]They locked up funds about 10.5 billion Ghana cedis, right? Who is going to pay that money, right? And if we are supposed to pay, how are we going to get that money? Are we going to levy people to pay it? So, that in itself is important. But, if you're able to sanitize the space well, we will be able to go on the tangent of Kenya and co who are able to do single digits. But, as long as the risk remain in our banking system, we cannot, you know, come as low as maybe 10%. We'll still be in the highs of the 20s.

[00:54:07]>> Economic transformation from my perspective cannot be done without a banking sector. And we know how critical their place is in showing economic growth, basically. Now, the sectors that are going to feel the stress are the manufacturing sector, the services sector, because these These are going to be hard times going into the next phase of the economic projection. Government The Finance Minister says they're going to introduce a new economic model. We are yet to see. It's a One thing is enough time for us to see the translation. The youth unemployment narrative has been running from every government across Africa. Enough of these talks. Now, we want to see real reflection. And there is time many of us have They launched a lot of projects in 2025, 2026. We're going to want to see how those projects have yielded fruit.

[00:54:53]>> I'm looking at how >> Basically.

[00:54:54]>> the big push of our economy >> The road minister was on the road as such as a big push. It seems as if some projects are not pushing. There's still some development that we'll basically be analyzing here on the show. Finally, Caleb, your final word.

[00:55:07]>> Well, I I think I slightly disagree with the CRR requirement. I think at this point, from the BOE's perspective, it's just for managing liquidity within the sector. Because if you are speaking about bank runs and all of that, there are so many mechanisms that can put in place to prevent that from happening.

[00:55:21]For instance, making sure that you're not overexposed to government debt, and having a deposit protection for customers >> be exposed to it, anyway.

[00:55:29]>> Because of the that the type of economy we run. But, I think there are so many other factors that we can take in we can put together to ensure that we don't really need the cash reserve. Aside for the >> This is an ongoing conversation. We'll be building up here on Beyond the Numbers. Waiting to see Yeah, tomorrow is Rep Your Jersey. Those supporting Arsenal [music] appear a PSG, you have to be at the where are we having it?

[00:55:50]>> We are having it at Aviation Social big enough >> You're going to be there, right?

[00:55:55]Barcelona jersey, but nobody is playing Barcelona. As for Chelsea, as for Chelsea next season >> We are going to be there. Chelsea conversation, we'll have that, but tomorrow I'm repping Tottenham Hotspur [music] to tell everybody that they survived relegation test.

[00:56:09]>> They've done well. I'm supporting Arsenal because of Smith Rowe Smith basically. So, Arsenal guys, make us proud. Have a wonderful evening. Thank you for