• The Bank of Ghana said in its Monetary Policy Committee report that average lending rate dropped by 1.7 percent
• Consumer inflation has dropped further by 1.0% to 7.5% in May 2021
• The Bank of Ghana has said the stock of gross loans and advances increased to ¢47.6 billion at the end of February 2021
The Bank of Ghana’s data has shown that the average lending rate dropped marginally by 1.7 percent since the start of the year to April 2021 despite inflation declining by 1.9 percentage points over the same period last year.
While the government is set to reap the benefits via lower cost of funding, investment advisory firm, Doobia, says “the challenge would be to transmit the benefits to the private sector via lower lending rates, especially given that commercial banks take time to adjust their lending rates in response to positive market developments in Ghana.”
Even though the policy rate of the Bank of Ghana went down by one percentage points, it is expected that banks will take some time before it cuts down its lending rates.
“While most banks have generally tightened credit conditions in response to the pandemic [covid-19], we believe that the failure to transmit lower inflation and policy rates into cheaper credit for the private sector is also hampering credit demand. It is clear that attempts by the authorities to resolve the conundrum by devising new methods for calculating base lending rates are not having the desired effect on credit demand at the moment. And the status quo is likely to remain until the authorities find a way to make commercial banks more responsive to policy decisions and macroeconomic data releases,”, Doobia explained.
Also, Consumer inflation has dropped further by 1.0% to 7.5% in May 2021, from an 8.5% in the previous month.
Even this is below the midpoint of the Central Bank’s target range of 6-10% for the first time in history.
Meanwhile, the Bank of Ghana has said the stock of gross loans and advances (excluding the loans under receivership) increased to ¢47.6 billion at the end of February 2021, representing a 3.6% annual growth, lower than the 26.0% growth in February 2020.