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Banks' interest rates must reflect
improvements in the overall economy
Accra, July 31, Ghanadot - At the launch of the Bank
of Ghana (BOG) 50th anniversary celebration on Tuesday,
.President John Agyekum Kufuor appealed to the central
bank to prevail on the commercial banks to lower their
interest rates to reflect improvements in the overall
economy.
He said the commercial banks and non-banking financial
institutions should be made to accept a principle, of
operating within a balanced social and economic needs of a
country, that allowed the charging of conscionable interest
rates.
President Kufuor described the current interest rate
situation as "a bit odd," where the strong performance and
positive results of the national economy were not being
reflected as gains in the pockets of the people.
Ghana's real Gross Domestic Product (GDP) has improved from
4.2 per cent in 2001 to 6.2 per cent in 2006, he remarked.
The sense at the BOG's celebration was about overall
improvement in Ghana's economic performance: A cut
back on Government's domestic borrowing and debt forgiveness
of about eight billion dollars that resulted in the lowering
of interest rates from over 50 per cent in 2001 to current
rates ranging between 18 and 21.4 per cent with the Central
Bank's prime rate pegged at 12.5 per cent.
To the he president regret, he said, "So far, the picture we
have of the banks is one that derives huge profits from high
interest lending to government and corporate organizations.
Meanwhile, there are hardly any services provided to the
general public."
President Kufuor said BOG, on account of its strong
leadership of the financial sector and exemplary management
of the monetary policy, which had resulted in the highly
acclaimed macro-economic stability of the nation, should
co-operate with Government in targeting the micro-economic
sector of the economy to help the average citizen benefit
from the improved economy by way of access to financial
services and employment.
As a regulator, the bank must demonstrate a heightened sense
of social responsibility by ensuring that the financial
institutions competed on fair terms and branched out to all
localities.
The bank should also support good causes in education,
health care and general sanitation.
Additionally, the President challenged the BOG to exploit
its autonomy and authority to let its impact be felt in
innovative ways.
He said with the country's economy being mainly agricultural
the bank could, in conjunction with the Government, use
imaginative methods like discriminatory interest regime to
get the financial sector to support small and medium
enterprises development.
"The Government is determined to move this country into a
middle-income status by the next decade. In this endeavor,
it looks up to all state institutions, especially the
Central Bank, for co-operation and support to realize this
objective."
President Kufuor said the entire nation should build on the
gains made in order to achieve even higher rates of growth
and poverty reduction in line with the Millennium
Development Goals.
He said in asking for closer co-operation, Government did
not envisage a subservient status for the bank, and that the
Bank must see itself as part of the nation's socio-economic
leadership.
Dr Paul Acquah, Governor of the Bank, said its focus was to
ensure price and financial stability, adding that the future
of the financial sector should be one that was vibrant and
well anchored in financial stability.
The bank's role, he said, would be pivotal in making this to
happen, he said.
BOG was established by the passage of the Bank of Ghana
Ordinance Number 34 by the British Parliament on March 4,
1957.
The week-long 50th anniversary celebration is on the theme:
"Fifty Years of Central Banking and the Millennium
Development Goals."
Source GNA
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