Feb. 19 -- Ghana’s central bank cut its benchmark lending rate for only the second time in three years, increasing pressure on domestic lenders to lower their borrowing costs.
Ghanaian commercial-bank lending rates are currently about 30 percent, above the African average, economists say. According to central bank data, the ratio of non- performing loans to gross loans rose to 14.9 percent in December 2009, from 7.7 percent in December 2008, the Governor said today.
Banks should ”respond by reducing their lending rates appropriately,” Amissah-Arthur said. ”This will allow for a restoration of credit growth in the economy and ensure a steady growth in output.”
Last week, Finance Minister Kwabena Duffuor said he and Amissah-Arthur had spoken to banks about lowering their lending rates.
“We are not happy about the banks lending to the private sector at 30-plus percent,” Duffuor said in parliament on Feb. 10, according to the official report of parliamentary debates, known as The Hansard.
‘Pro-Growth Shift’
Slowing consumer inflation spurred Amissah-Arthur to reduce the prime rate by 50 basis points in November, his first interest-rate cut since taking office on Oct. 1. The reduction was the first since December 2006.
The back-to-back rate cuts are ”a significant pro- growth shift,” Samir Gadio, a Lagos-based analyst with Renaissance Capital said in an e-mailed note today. Yields on Ghana’s treasuries bills and bonds ”will continue to drop” in the next few weeks, he said. Inflation in the West African nation has slowed for seven straight months after reaching a five-year high of 20.7 percent in June. Annual consumer inflation slowed to 14.8 percent in January, the Ghana Statistical Service said on Feb. 10.
Further Cuts
Amissah-Arthur said ”steady disinflation” may continue, moving in a range of 7.5 percent to 11.5 percent this year.
Slowing inflation could result in further central bank interest rate cuts, said Sampson Akligoh, an economic analyst at Databank Financial Services in Accra, in a written response to questions.
”I think the prime rate is likely to end the year below 14 percent,” he said in written comments today.
The rate, previously referred to as the prime rate, is now being called a policy rate, Amissah-Arthur said.
The Ghanaian cedi rose to 1.4247 against the dollar as of 2:39 p.m. local time from 1.4350 late yesterday.
Feb. 19 -- Ghana’s central bank cut its benchmark lending rate for only the second time in three years, increasing pressure on domestic lenders to lower their borrowing costs.
Ghanaian commercial-bank lending rates are currently about 30 percent, above the African average, economists say. According to central bank data, the ratio of non- performing loans to gross loans rose to 14.9 percent in December 2009, from 7.7 percent in December 2008, the Governor said today.
Banks should ”respond by reducing their lending rates appropriately,” Amissah-Arthur said. ”This will allow for a restoration of credit growth in the economy and ensure a steady growth in output.”
Last week, Finance Minister Kwabena Duffuor said he and Amissah-Arthur had spoken to banks about lowering their lending rates.
“We are not happy about the banks lending to the private sector at 30-plus percent,” Duffuor said in parliament on Feb. 10, according to the official report of parliamentary debates, known as The Hansard.
‘Pro-Growth Shift’
Slowing consumer inflation spurred Amissah-Arthur to reduce the prime rate by 50 basis points in November, his first interest-rate cut since taking office on Oct. 1. The reduction was the first since December 2006.
The back-to-back rate cuts are ”a significant pro- growth shift,” Samir Gadio, a Lagos-based analyst with Renaissance Capital said in an e-mailed note today. Yields on Ghana’s treasuries bills and bonds ”will continue to drop” in the next few weeks, he said. Inflation in the West African nation has slowed for seven straight months after reaching a five-year high of 20.7 percent in June. Annual consumer inflation slowed to 14.8 percent in January, the Ghana Statistical Service said on Feb. 10.
Further Cuts
Amissah-Arthur said ”steady disinflation” may continue, moving in a range of 7.5 percent to 11.5 percent this year.
Slowing inflation could result in further central bank interest rate cuts, said Sampson Akligoh, an economic analyst at Databank Financial Services in Accra, in a written response to questions.
”I think the prime rate is likely to end the year below 14 percent,” he said in written comments today.
The rate, previously referred to as the prime rate, is now being called a policy rate, Amissah-Arthur said.
The Ghanaian cedi rose to 1.4247 against the dollar as of 2:39 p.m. local time from 1.4350 late yesterday.
