According to the Bank of Ghana (BoG), loans to the private sector shrank in October 2023.
The decrease can be ascribed to banks shifting their focus from credit expansion to short-term investments.
This was disclosed by Central Bank Governor Dr. Ernest Addison on Monday, November 27, 2023, at the 115th Monetary Policy Committee (MPC) media briefing.
The reduction in credit is a reaction to increased lending risks brought on by the macroeconomic instability and the effects of the Domestic Debt Exchange Program (DDEP).
October 2023 saw a noteworthy 7.5 percent reduction in private sector lending, which stands in stark contrast to the spectacular 57.3 percent expansion in the same month the previous year. Real terms showed an even more marked decrease of 31.6 percent as opposed to 3.0 percent increase in the same time.
The expansion of the economy is probably going to suffer from the tightening of lending requirements.
But according to the BoG, the reduction is required to keep inflation under control and preserve financial stability.
The next meeting of the MPC is set for January 2024. It is unclear if the Committee will stick to its current course of action or make any changes.
Important Points
In October 2023, private sector credit had a noteworthy decline of 7.5 percent, in contrast to a growth of 57.3 percent during the same month in 2022.
In October 2023, the interbank weighted average rate was 28.49 percent, up from 23.98 percent in the same month the previous year.
In October 2023, the average bank loan rate was 32.69 percent, up from 31.40 percent during the same time in 2022.
consequences
The cautious stance taken by banks in the face of economic uncertainties is highlighted by the MPC’s findings. Banks are giving short-term investments and risk management precedence over increasing lending.
All things considered, Ghana’s difficult economic climate is reflected in the decline in private sector credit. The Central Bank will have to keep a close eye on things and take action to encourage economic expansion.
Source: Marzuuq Issah | Ghana360news.com
