Business

Economist predicts lending rates to remain high for a long time

An Economist with Databank, Courage Martey, is predicting lending rates to remain high for a longer period despite calls by several stakeholders including the Ghana Union of Traders Association (GUTA) 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.

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.”

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