Vice President, Dr Mahamudu Bawumia, has said interest rates in the country will come down if more Ghanaians save.
According to him, the Bank of Ghana (BoG) Policy Rate and Treasury Bill rates and other microeconomic indicators have trended downwards but have had little effect on pushing the interest rates down.
For him, the phenomenon has remained the dilemma of many governments in the past.
The Monetary Policy Committee (MPC) of the Central Bank maintained its key lending rate to commercial banks at 17 per cent. The rate is the lowest since November 2013.
Measures so far implemented by the Central Bank such as the Ghana Reference Rate which stood at 16.19 per cent as at June is yet to help in reducing the cost of borrowing as well.
Speaking at the Ghana Industrial Summit and Exhibition organized by the Association of Ghana Industries (AGI) Dr Bawumia said, “Now we also have a bottleneck which is in the cost of credit. This has been a major issue for all businesses that credit cost is very high and how to bring the cost of credit down.”
“Of course we have been stabilizing the macroeconomic indicators and the Treasure Bills have been coming down and the Bank of Ghana Prime Rate or Policy Rate has also been coming down but we are not seeing that drastic reduction in the lending rate and this has always been an issue. It was an issue at my time at the Bank of Ghana and it is still an issue today.
“But when you look at what we need to do to bring interest rates down; you have to understand that, ultimately the rate of interest is a price; is a result of demand and supply. If supply goes up the prices will come down. So if you look at Savings then the demand and supply of savings will determine your interest rates in the economy.
“If you don’t have people saving in the economy then your interest rates for one reason or the other will turn to be high.
“But there are a number of reason why we have very sticky interest rates in terms of moving downwards. They’ve moved down but they are not moving down as fast as we can. So we need to engineer more savings in the economy and that’s why we need to have more financial inclusion in the economy; we do also need to de-risk a lot of borrowers,” Dr Bawumia said.
For this reason, the government is working at fast-tracking the National Identification card and Digital Address system to provide a proper framework to aid the financial sector to disburse less risky loans.