Bank of Ghana keeps policy rate at 14.5 percent
There is a gap disparity between lending rates and monetary policy rate, Economists
The Research Department of Bank of Ghana has responded to assertions made by Togbe Afede XIV, Paramount Chief of the Asogli Traditional Area, blaming the central bank for the high spate of interest rates in the country.
Togbe Afede XIV, according to a MyJoyonline report published on November 26 this year indicated the Bank of Ghana has lost focus as it was competing with the banks for profits, instead of contributing to the macro-economic objectives of stability, growth and employment creation.
“The scapegoat has always been government borrowing, the high indebtedness of government. But I don’t think that is where all the problem”, he disclosed this when he paid a courtesy call on the Speaker of Parliament, Alban Bagbin.
“The UK’s debt to GDP ratio is about 104%. Ghana’s is 81%. Relatively, we are better. The per capita indebtedness of the UK is $42,000, ours is $1,400. Compared to income per capita, we are much better. Our income per capita is $2,300 that of the UK is $40,000. So UK’s debt per capita, $42,000, is higher than income per capita, $40,000. Our debt per capita $1,400, is much less than our income per capita, $2,300”, the renowned Paramount Chief said.
“So relatively, the UK is more indebted than Ghana, yet the rate at which the Bank of England lends to banks currently is 0.1%, while Bank of Ghana lends to our banks at 13.5%. That is a whopping one hundred and thirty-five times the Bank of England rate! Astonishing!!”, he added.
Continuing, he said “the UK GDP, which reflects the size of the economy, is $2.7trillion, almost 40 times the size of our economy, which is $72billion (GDP). But guess what? Bank of England made a profit of £57million ($76million) in 2020/21, down from £72million ($96million) in 2019/20. Bank of Ghana, on the other hand, made a profit of GHS1.57billion ($270million) in 2020, down from GHS1.8billion ($310million) in 2019. The question is, doing what?!”
“Yes, that is the benefit from their 13.5% lending rate. Mr. Speaker, this is where the problem has been, but we don’t seem to know. Bank of Ghana has lost focus, competing with the banks for profits, instead contributing to the macro-economic objectives of stability, growth and employment creation”, he further explained.
“Now let’s look at our commercial banks, he said, adding “Ecobank in the first nine months of this year, January to September, made a net profit of ¢468million. In a pandemic environment, ¢468million net profit! The equivalent figure for Standard Chartered Bank was ¢385million. These are big increases from the corresponding figures of the previous year. If the economic environment is so difficult, and their costs are high, as they often claimed, how did they make so much profit?”, Togbe Afede XIV questioned.
He added that the government alone cannot take the blame for the high cost of credit in the country.
But in a rare response to the claims, the Research Department of the central bank on December 21, described the assertion as "disingenuous" on the part of anyone who tries to shift the focus away from the real structural issues that have challenged the lowering of lending rates in Ghana and the progress made by the Bank of Ghana.
It also described as biased the analysis made seeking to shift blame to the central bank and the commercial banks over high lending rates in the country.
“This is doing a huge disservice to the policy discourse that is currently ongoing to find a way to address these structural bottlenecks and the legacy of years of macroeconomic mismanagement, as we try to build back better from the impact of the pandemic,” the concluding part of the statement read.
Read the full statement below:
The Bank of Ghana Headquaters