An Economist with Databank, Courage Martey, is concerned that lending rates in the short term, will not see a reduction, even though multiple business groups such as the Ghana Union of Traders Association (GUTA) have been calling for a reduction in the cost of credit to enable them to be competitive in the sub-region.
Latest data from the Bank of Ghana shows that average lending rates for banks as of October 2020 was 21.26 percent, which is the lowest in more than a year.
Speaking to Citi Businesses News on interest rates for businesses in 2021, Courage Martey said amongst other factors that, government’s plan to borrow over GH¢22 billion in the first quarter, could crowd out the private sector and keep interest rates unchanged for a while.
“Government needs to do quite an amount of borrowing on the domestic market. And with those capital being pile up towards the government treasuries it is going to compete or outcompete the private sector. And that could also mean that being a safer borrower compared to the private sector, banks will prefer to lend to the government and that could crowd out the private sector, which will mean that lending rates might not change in favour of the private sector in the very short term especially when the policy rate has not signalled otherwise.”