Banks exercising caution in giving out loans – BoG

The Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has said there is no need to worry over the refusal of banks to give out loans lately, especially in the wake of the covid-19.

He explained that the banks are being shrewd in their operations in the midst of the pandemic.

The central bank’s report for the first half of this year indicates that banks did not give out more loans as compared to previous years.

Asked what accounted for the drop in the quest of the banks to give out loans, Dr Addison explained while speaking in an interview with Graphic Talks360 on Thursday June 25 that the banks are only exercising care so that they do not create more non-performing loans in the system.

“I don’t think we should be too concerned, the banks also have to be careful so they do not create more non-performing loans in the system,” he said.

He added that : “It is important they they give out good credit”

Dr Addison further indicated that the central bank is optimistic by next year the covid-19 pandemic will be over in order to restore the glory of the banks.

“We are hopeful that the pandemic will be resolved next year,” he said adding that: “The outlook for the banks will better.”

On Wednesday June 24, Dr Addison appeared before the Public Accounts Committee of Parliament to answer some questions relating to the Auditor-General’s report.

Among some of the issues he spoke about during the hearing were issues on the cedi’s performance against the dollar and also some businesses still pricing in dollars in Ghana in spite of the ban paced on such act by the central bank.

He warned the general public and businesses especially to desist from pricing in dollars.

Answering a questions posed by Member of Parliament for Ningo Prampram and a member of the PAC, Samuel Nartey George regarding the measures the central bank has taken to tackle persons trading in dollars in Ghana, an action that goes against the BG’s regulation, Dr Addison said : “As you are aware the central bank has come out very clearly on trying to declare dollarization illegal and we have gone round trying to stop people from pricing and invoicing in US dollars .

“ But what you described is the situation in which the school is indexing its charges to the exchange rate . They can decide to index their charges to the consumer price index , that is another way of measuring what the change in cost of living is.

“And we found out that people are more interested indexing to the dollar rather than indexing to the CPI.

“ I think that if you look at the stability that we are seeing in the exchange rate, maybe they better be indexing on the CPI, which if you look at where the inflation rate is today at 10.6%, that is much higher than indexation to the dollar.

“That I think it reduces the incentives for dollarization. When you have a stabled currency that is not depreciating very fast, you don’t have widespread dollarization because the incentive is not there.”

He added: “We already said that we do not encourage invoicing in foreign currency. We have already said that we do not support dollarization, But pricing generally in the economy is on the basis of an assessment of conditions, and typically the consumer pricing index which is the rate of inflation is what would normally be used as the benchmark.

“Even for wage adjustments when the labour goes to negotiate with their employers they look at the change in the cost of living and use the inflation rate as an adjustment factor. So all that I am saying is that now that we have a relatively stable currency the incentive to index in the US dollar is not there, but yes it is illegal to be pricing in dollars. It is illegal to invoice in USD, it is illegal to index in USD.”