Former Finance Minister, Seth Tekper says the Bank of Ghana cannot be blamed for the high lending rates in the country, but rather the government’s excessive borrowing is the cause of the high cost of credit.
He, therefore, wants the government to accept the responsibility for the high cost of loans because of its appetite for borrowing, particularly on the domestic market.
Some analysts and economic think tanks, particularly the Institute of Economic Affairs have blamed the Bank of Ghana, government and even the banks for the high lending rates in the country, though have gone down significantly to about 20.6% on the average, from the highs of 29%.
But speaking in an interview with Joy Business, Mr. Tekper said until government reduce its borrowing and concentrate on raising more revenue, the cost of credit will continue to remain high.
“We instituted programmes such as the Sinking Fund, ESLA, all intended to reduce the high debt and arrears. This was the beginning to trim the debt and create fiscal space for the private sector to access funds, and consequently, reduce interest rates going forward.”
“The Policy Rate is reflected in rates going down. The fiscal situation is suggesting that the rates will not go down; if the government is in the same market and is borrowing from the market then there is a crowding-out effect and making money inaccessible to the private sector”, he stressed.
Continuing, Mr. Tekper said “when I heard that appeal by prominent government officials, it looks like the BoG was being made a scapegoat for the policy rate. The policy rate itself…yes is not moving in tandem with the market rate which is not excessive from the perspective of where they have traditionally been. I think we should be examining the fiscal and the pressure that it is bringing and that is in the realm of government.”
He pointed out that the Central Bank does not control the fiscal economy and therefore cannot do anything when things are wrong.
“The monetary authorities do not control the fiscal situation, it’s the Ministry of Finance. I would have wished that attention will have been drawn to the deficit which is leading to more borrowing, domestically and externally, but that was omitted from the speeches of prominent people including the President [Nana Akufo-Addo]”.
Mr. Tekper therefore once again called for a homegrown policy to help the nation achieve fiscal consolidation.
“What I’m even saying now buttresses the need for a policy that is homegrown to achieve fiscal consolidation.”
The Bank of Ghana kept the policy rate – the rate at which it lends to commercial banks at 13.5% for the first time since it cut the rate by 100 basis points in July 2021.
