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Interest rates will remain high till issues are addressed

By Belinda Ayamgha

Accra, Aug.07, GNA – Players in
Ghana’s banking sector say reductions in the Monetary Policy rate would not
necessarily reflect in the lending rates of banks until other factors
influencing the rates are also addressed.

Answering questions as part of a
panel discussion on the theme “Maintaining a stable macro-economy for sustained
and inclusive development” at the Ghana Economic Forum, Mr Henry Oroh, the
Managing Director of Zenith Bank Ghana Limited, said interest rates in the
banking sector were still high mainly because the cost of credit for banks
remained high.

He said although the Bank of Ghana
had significantly reduced the Monetary Policy Rate, which determined banks’
lending rates, it had not reflected in the sector yet because funds were still
expensive, with cost of deposits at around 20 per cent.

Mr Oroh, who is also the Chief
Executive Officer of the Bank, noted that a reflection of the reduced MPR would
not happen if owners of funds continued to ask for higher returns on their
deposits.

He explained that banks and owners of
funds had to align with the Government’s agenda to bring cost of funds down and
ensure lower interest rates.

Mrs Patience Akyianu, the Managing
Director of Barclays Bank Ghana Limited, lead sponsors of the Ghana Economic
Forum, also noted that the high non-performing loan ratio in the sector; about
20 per cent, was a contributing factor to the prevailing high interest rates in
spite of the reduction in MPR rate.

Cost of doing business in Ghana was
also high, which were all factored into pricing, she said.

She said the lack of a proper rating
system to separate good companies from weak ones compelled banks to generalise
in the decisions on who to lend to at what rates, in light of the high NPL
ratio.

“Till we sustain the macroeconomic
gains we have made and find a way to rate companies to separate good ones from
bad ones, till our NPLs reduce, we will not see the MPR rate translate into
interest rates,” she stated.

She added that companies also had a
responsibility to improve their governance structures and their efficiency.

The panel also discussed other
factors in maintaining a stable macro-economy.

Dr Osei Assibey, a Senior Lecturer at
the Department of Economics of the University of Ghana, who was also on the
panel, however, noted that although macroeconomic stability was important, it
was not enough in itself.

He said there was also the need for
increased structural transformation and productivity to go alongside the
macroeconomic gains.

Dr Kofi Amoah, the Chief Executive of
Progeny Ventures, also reiterated the need to fully interrogate the strength
and viability of the private sector as a lot of emphasis for was on that sector
for macroeconomic growth.

He urged the Government to look at
measures such as subsidies, appropriate taxes and accessibility and
affordability of credit, to enable the private sector to thrive and contribute
to sustained macroeconomic growth.

Other panelists were Mr Michael
Cobblah-Director C-nergy Global, Mr Hitesh Makhija-Chief Finance Officer Olam
Ghana, and Mr Ridle Markus, Africa Strategist, Research Barclay Africa.

The two-day Ghana Economic Forum
(GEF) 2017, is on the: “Building A Ghanaian Owned Economy, 60 Years After
Independence”.

It is being organised by the Business
and Financial Times newspaper and has been running since 2012.

The Ghana News Agency and other
partners are supporting the event.

More than 500 participants, including
economic experts and industry captains are dialoguing to chart a better part
for substantially growing Ghana’s economy using mainly local expertise and
resources.

GNA

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