With effect from July 1, the secondary reserve requirement for commercial banks will be 15 per cent instead of 35 per cent.

Also the requirement that banks hold 15 per cent of their deposits in the form of medium term securities has been abolished. The new policy initiative is expected to free capital for productive sectors of the economy. However, the primary reserve requirement will continue to be 9.0 per cent.

Dr Paul Acquah, governer of the Bank of Ghana, announced this in Accra when he delivered a lecture on the topic ?Monetary policy setting in Ghana issues and prospects.?

Dr Acquah said the high level of reserve requirements of nine per cent of banks eligible deposits as primary reserves and 35 per cent as secondary reserves, in the form of treasury bills and medium term government securities, is the legacy of high fiscal deficits and the need for the Government to have a captive market to finance deficits.

Primary reserve is a percentage of a bank deposit it keeps with the Central Bank, whiles the secondary reserve is the percentage of bank deposit set aside in instruments like treasury bills, cocoa bills, and Bank of Ghana bills.

Dr Acquah said the Bank of Ghana like any other institution has reviewed the way of conducting its business by introducing a number of policy reforms.

The reforms are aimed at increasing the efficiency of the transmission of monetary policy, and a gradual move towards a separation between Bank of Ghana open market operations (OMO) and funding the public sector borrowing requirements.