Banks exercising caution in giving out loans – BoG


The Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has said there is no need to worry over the refusal of banks to give out loans lately, especially in the wake of the covid-19.

He explained that the banks are being shrewd in their operations in the midst of the pandemic.

The central bank’s report for the first half of this year indicates that banks did not give out more loans as compared to previous years.

Asked what accounted for the drop in the quest of the banks to give out loans, Dr Addison explained while speaking in an interview with Graphic Talks360 on Thursday June 25 that the banks are only exercising care so that they do not create more non-performing loans in the system.

“I don’t think we should be too concerned, the banks also have to be careful so they do not create more non-performing loans in the system,” he said.

He added that : “It is important they they give out good credit”

Dr Addison further indicated that the central bank is optimistic by next year the covid-19 pandemic will be over in order to restore the glory of the banks.

“We are hopeful that the pandemic will be resolved next year,” he said adding that: “The outlook for the banks will better.”

On Wednesday June 24, Dr Addison appeared before the Public Accounts Committee of Parliament to answer some questions relating to the Auditor-General’s report.

Among some of the issues he spoke about during the hearing were  issues on the cedi’s performance against the dollar and also some businesses still pricing in dollars in Ghana in spite of the ban placed on such act by the central bank.

He warned the general public and businesses especially to desist from pricing in dollars.

Answering a question posed by Member of Parliament for Ningo Prampram and a member of the PAC, Samuel Nartey George regarding the measures the central bank has taken to tackle persons trading in dollars in Ghana, an action that goes against the BG’s regulation, Dr Addison said : “As you are aware the central bank  has come out very clearly on trying to  declare dollarization illegal and we have gone round trying to stop  people from pricing  and invoicing in US dollars .

“ But what you described  is the situation in which  the school is indexing  its charges  to the exchange rate . They can decide to index their charges  to the consumer price index , that is another way of measuring  what the change in cost of living is.

“And we found out that people are more interested  indexing to the dollar  rather than indexing  to the CPI.

“ I think that if you look at  the stability that we  are seeing in the exchange rate , may be they better be indexing on  the CPI , which if you look at where the inflation rate  is today  at 10.6%, that is much higher than indexation to the dollar.

“That I think it reduces the incentives for dollarization. When you have a stabled currency that is not depreciating very fast , you don’t have widespread dollarization because the incentive is not there.”

He added : “We already said that  we do not encourage  invoicing  in foreign currency . We have already said that  we do not support dollarization , But pricing generally in the economy is  on the basis of  an assessment of conditions  and typically the consumer pricing  index which is the rate of  inflation  is what would normally be used as the benchmark .

“Even for wage adjustments when the labour goes to negotiate with their employers they look at the change in the  cost of living  and use the inflation rate as an adjustment factor . So all that I am saying is that , now that we  have a relatively stable currency  the incentive to index  in the US dollar is not there , but yes it is illegal to be pricing in dollars. It is illegal to invoice in USD , it is illegal to index in USD.”




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