The Bank of Ghana (BoG) has reversed its decision to abandon the previous Cash Reserve Ratio (CRR) policy, which mandated that foreign currency deposits be held in cedis. This significant policy shift, announced following the Monetary Policy Committee meeting on Wednesday, May 20, 2026, will take effect on June 4, 2026.
Policy Reversal and Previous Stance
This marks a dramatic U-turn for the central bank, which had only scrapped the policy approximately one year prior. In November 2023, the previous management of the BoG implemented a unified 15% CRR on both cedi and foreign currency deposits, requiring all reserves to be held in local currency. The stated aim of this measure was to tighten liquidity and control inflation and foreign exchange volatility at a low cost.
However, in June 2025, the BoG announced a move away from this policy, introducing a currency-matched CRR. This new approach stipulated that foreign currency deposits must be backed by reserves held in the same foreign currency, while cedi deposits would be backed by cedi reserves. The primary justification for this switch was to address what the central bank termed an asset-liability mismatch under the previous arrangement.
Reasons for the Reversion
Despite the rationale provided for the currency-matched CRR, expert analysis suggests the policy proved to be costly for the Bank of Ghana. Reports indicate that the currency-matched CRR, implemented by the new management a year ago, significantly contributed to substantial losses incurred by the BoG in 2025. The exact figures of these losses have not been fully detailed publicly but are understood to be a key driver behind the current policy reversal.
The return to the previous policy suggests that the perceived benefits of the currency-matched CRR did not outweigh its financial implications or its effectiveness in achieving broader monetary policy objectives. Central banks often adjust their reserve requirements to manage liquidity within the banking system, influence lending, and maintain financial stability. The BoG’s latest move indicates a strategic recalibration based on performance and economic conditions.
Expert Analysis and Potential Impact
Financial analysts suggest that the previous policy of holding forex reserves in cedis could help bolster the local currency by increasing demand for it. Conversely, the currency-matched CRR might have led to a depletion of cedis in the system as banks held reserves in foreign currencies. This could have put downward pressure on the cedi, a concern for an economy heavily reliant on imports.
The reversal is expected to inject a significant amount of liquidity into the Ghanaian economy as banks will no longer need to hold an equivalent amount of foreign currency for their forex deposits. This could potentially ease credit conditions and stimulate economic activity. However, it also raises questions about the BoG’s ability to manage inflation and exchange rate stability, objectives that the initial unified CRR aimed to address.
Looking Ahead
The Bank of Ghana’s decision underscores the dynamic nature of monetary policy and the challenges faced by central banks in balancing liquidity management, inflation control, and financial stability. The effectiveness of this renewed CRR policy will be closely monitored in the coming months. Key indicators to watch will include the performance of the Ghanaian cedi, inflation rates, and the overall liquidity levels within the banking sector. The BoG’s future actions will likely depend on how these metrics evolve and whether the reintroduction of the previous CRR policy achieves its intended outcomes without creating new economic imbalances.
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