Dr. Ernest Addison, BoG Governor
THE MONETARY Policy Committee (MPC) of the Bank of Ghana (BoG) has kept the policy rate at 13.5 per cent after its 101st meeting in Accra.
The BoG said the committee assessed that the risks to inflation and growth were broadly balanced, hence its decision to keep the policy rate at 13.5 per cent.
According to him, developments in interest rates broadly showed a downward trend across the yield curve.
“The 91-day and 182-day Treasury bill rates declined to 12.7 per cent and 13.4 per cent respectively in June 2021 from about 14.0 per cent for both instruments in June 2020. Similarly, the rate on the 364-day instrument decreased marginally to 16.3 per cent from 16.9 per cent over the same comparative period. Rates on all the medium- to long-term instruments generally declined over the review period.”
Dr. Ernest Addison, Governor of BoG said, “The weighted average interbank rate declined to 12.9 per cent in June 2021 from 13.8 per cent a year earlier, consistent with the reduction in the Monetary Policy Rate (MPR) in May 2021 and supported by improved liquidity conditions on the interbank market. In a similar trend, the average bank lending rates declined marginally to 20.6 per cent in June 2021 from about 22.0 per cent in the corresponding period of 2020.”
He revealed that the growth rebound which began in the last quarter of 2020 though continued into the first half of 2021, the committee was however concerned about the continued sluggishness in new lending by banks which could undermine the growth momentum.
“This slow growth in lending reflects increased credit risks on account of uncertainties in the business environment due to the impact of Covid-19 pandemic on the real sector, coupled with very high yields offered on government securities due to increased government borrowing. This crowding-out effect continues to keep the credit to GDP gap below the long-term trend and is likely to delay recovery of the economy and discourage banks from strengthening their credit underwriting processes to manage credit risks from lending to underserved sectors of the economy,” he underlined.
Dr. Addison indicated that based on macro-prudential risk assessments, the committee expected the banking sector to withstand mild to moderate credit risk shocks although a new wave of the pandemic in Ghana could further elevate credit risks and would require close monitoring of banks’ capital and liquidity buffers.
BY Samuel Boadi