Lending rates will drop; the current situation is short-term – Ghana Association of Banks

The Ghana Banks Association is optimistic that lending rates will drop before the end of 2022.

This is in line with the Bank of Ghana’s forecast that inflation, which is one of the main determinants of interest rates, will decline over the next couple of months.

Inflation soared to 23.6% in April 2022, forcing the Bank of Ghana to adjust its policy rate to 19%. This should help to mop up excess liquidity from circulation and control inflation.

Speaking to Joy Business, Ghana Banking Association Chief Executive Officer John Awuah said the current interest rate hike is temporary and therefore will be short-lived.

” The current situation [rising interest rates] is for the short term. We all know what is happening in the global economy.

“We also believe that much of the inflation that has pushed rates to where they are now is imported inflation; and the circumstances in the world, supply chain constraints, shrinking,” said underlined Mr. Awuah.

He further stated, “We are looking at a gradual decline in inflation which should have a positive impact on lending rates. We therefore have every reason to believe that it is temporary even if it is worrying”.

“It’s for the short term, but we believe that by next year we should not follow the current trend,” Awuah added.

Banks cannot to be blamed for increasing interest rate

The Ghana Banking Association has also rejected suggestions to regulate the exchange rate regime in the country.

The Ghana Industries Association, in a recent reaction to high interest rates, hinted that it would meet with the Bank of Ghana to intervene in the market by committing banks to reduce their cost of credit to the private sector.

But in response to industry suggestions to introduce some control, John Awuah argued that such a move would be counterproductive.

“Treasuries in January or February of this year were at 12%. As we speak, it’s at 21%. Ghana’s benchmark rate, which is a combination of the policy rate, the interbank lending rate and the treasury bill rate, was 13.9% in January this year. But it is currently at 20.8%”.

“So it’s not about the banks, it’s the fundamentals driving the rates we’re seeing right now,” Awuah said.

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