When the Bank of Ghana (BoG) amended its dynamic Cash Reserve Ratio (CRR) to a uniform 20% in June 2026, the financial market welcomed the decision as a highly cost-effective policy shift. By raising the amount of interest-free reserves commercial banks must permanently park with the central bank, the regulator was expected to automatically sterilize billions of cedis in excess liquidity, at absolutely zero cost to the BoG’s own balance sheet.
Yet, a major paradox has emerged in the weeks following the directive. Despite the massive liquidity drain imposed by the new 20% reserve requirement, the central bank continues to run aggressive Open Market Operations (OMO), offering banks attractive short-term notes at yields (from 10.45% to 11.05%) that are double the current government Treasury bill rate.
With the 91-day T-bill rate slumping to under 5%, the BoG’s willingness to continue borrowing from commercial banks via OMO at a significant premium has triggered deep questions among financial market analysts. Is there simply an unmanageable mountain of excess liquidity left to mop up, or is the central bank taking on an unnecessary financial burden that the central government should be carrying?
Is the Excess Cash Pool Deeper Than Predicted?
The first logical explanation for this policy paradox is that the volume of unbacked cash circulating within the banking structure is far larger than originally estimated. Even after the 20% reserve requirement pulled an estimated GH¢16 billion directly out of circulation, commercial banks are still holding vast pools of investable liquidity.
Because the domestic inflation rate is low at 3.7%, the regular economy is not absorbing this cash fast enough. Rather than letting this idle money sit in the system, where banks could use it to purchase foreign exchange and worsen the cedi’s 8.4% depreciation, the BoG has been forced to maintain its high-paying OMO program as a secondary, aggressive vacuum cleaner to capture the remaining liquidity.
The Central Bank vs. Fiscal Policy Balance Sheet Conflict
The more controversial debate among economists centers on the division of financial costs between the central bank and the Ministry of Finance. Because the Ministry of Finance has successfully driven down T-bill rates to historical lows, the central government is currently borrowing from the domestic market at an incredibly cheap cost. However, because T-bill yields are yielding barely more than inflation, institutional investors and commercial banks have completely lost interest in buying them.
To keep that rejected cash from rushing into the black market for US dollars, the Bank of Ghana has been forced to step into the gap. By paying premium OMO rates to entice banks, the central bank is effectively taking on a massive, interest-bearing liabilities burden on its own balance sheet to absorb the market fallout of artificially low T-bill rates.
The Operational Risk: Straining the Regulator’s Balance Sheet
While this double-defense setup—a strict 20% reserve ratio alongside high-yield OMO tools, has successfully insulated the cedi against volatile global fuel prices, it carries a heavy corporate cost for the central bank.
By paying premium interest rates on short-term OMO bills while receiving no income from the interest-free cash reserves, the BoG’s operational expenses are mounting. Financial experts warn that if the central bank indefinitely functions as the high-paying borrower of last resort to offset an overly cheap T-bill market, it risks piling up structural losses on its own balance sheet, creating a fresh monetary challenge down the line.
