Government appears frustrated that lending rates remain immovable in spite of improvements in key macroeconomic indicators like inflation and treasury bill rates, and is considering bringing what Ken Ofori Atta calls some “moral pressure” to bear on banks.
At the same time, the Finance Minister said, government is in discussions with the World Bank to bring some US$150 million liquidity into the system, “which will then hopefully help bring the lending rates down.”
Inflation fell to 10.3 percent in January, 2018 – the lowest in five years, whilst the rates on the short-term treasury bills have trended downwards to about 13 percent, with deficit expected at 6.3 percent and growth for 2018 projected at about 8 percent.
Cost of borrowing, however, remains above 30 percent – a situation businesses continue to wail over.
Addressing the press on the state of the economy in Accra, the Finance Minister said: “We are going to continue to have the dialogue to see between moral pressure and actually putting resources in the banks to have the rates come down.
“Even as we work hard to bring down inflation and the rates [t-bills] as you have seen, you do not control the books of the banks and so if they have accumulated some non-performing loans over the period or their cost of funds have been high, they have a challenge in adjusting immediately to what we have done.
The key issue, really, for us would also be partly the effectiveness of the treasury single account so that we can continue not to borrow as much, and also finding a way to get some liquidity into the banking system, which presupposes the effectiveness in collecting our taxes.”
The Finance Ministry, he further revealed, would take over the ‘Ghana Incentive-Based Risk-Sharing System for Agricultural Lending’ (GIRSAL) programme from the Bank of Ghana, which is aimed at bringing a certain de-risking to agriculture lending.
“There is also a stimulus package from the Trade Ministry to subsidise interest rates and, also, the Ghana EximBank lends at around 8-10 percent,” Mr. Ofori-Atta.
State of the Economy
The Finance Minister said, so far, the work that has been put into transforming the abysmal macroeconomic indicators inherited from the previous government is beginning to bear fruits.
He maintained that a lot more would have to be done to improve revenue performance which has been the bane of government over the past year.
While reducing or abolishing some taxes is expected to incentivise production, he stated that Ghanaians must also contribute their bit by filing their tax returns.
Mr. Ofori-Atta added that apart from expecting voluntary tax compliance, the Ghana Revenue Authority would, equally, up its game to ensure it is able to mobilise as much revenue as it can for government to pursue its programmes.
He expressed confidence that when some key policies promised by government, such as the one-district one-factory, one-village, one-dam, among others, are fully implemented, the notion of economic transformation not trickling down would be effectively erased.