BoG concerned about credit decline to private sector

The Bank of Ghana is worried about the decline of credit to the private sector which has dropped from 20.0 per cent at the last quarter of 2013 to 16.5 per cent.

A credit conditions survey by the central bank showed a general tightening of credit for all loan types during the first quarter of 2014.

But on the sidelines of a Monetary Policy Committee news conference in Accra, Bank of Ghana Governor, Dr Henry Kofi Wampah, told the Graphic Business that the pace of growth in private sector credit remained generally unchanged at 33.0 per cent year-on-year at the end of February 2014.

Meanwhile, the banking sector for the first two months of the year has remained relatively stable and continues to record significant asset growth.

As of the end of February 2014, the banking sector assets went up to GH¢39.1 billion, from the GH¢28 billion recorded in February 2013.

This was driven mainly by advances, which accounted for 47.1 per cent of the total. The growth in assets was mainly funded by deposits which recorded an annual growth of 29 per cent to GH¢25.1 billion at the end of February 2014.

Developments in monetary aggregates point to increased liquidity conditions. Broad money grew by 25.6 per cent for the first two months of 2014, compared with 23.2 per cent in the same period last year. This was largely reflected in increases in currency in circulation and demand deposits.

Non-performing loans

The non-performing loans (NPL) ratio within the banking industry decreased to 12.7 per cent in February 2014, from 13.5 per cent in February 2013, while the ratio excluding the loss category declined to 4.9 per cent from 6.0 per cent in the same period last year.

Interest rates have generally trended up on the money markets between December 2013 and February 2014, reflecting movements in the policy rates.

T-bill rates

The 91-day instrument increased to 23.5 per cent from 19.2 per cent. Similarly, the 182-day increased to 21.2 per cent from 18.7 per cent.

The 1-year note rate also rose to 22.5 per cent from 17 per cent, and the rate on the two-year note increased to 23 per cent from 16.8 per cent while the three-year bond rate rose to 23 per cent from 19.2 per cent.

The weighted average interbank rate also increased to 18 per cent from 16.3 per cent in December 2013, while the average lending rates of the banks remained the same (at 25.6 per cent).

However, the base rate has increased from 21.5 per cent in December 2013 to 22.8 per cent in February 2014. The average rate on three-month term deposits remained unchanged at 12.5 per cent.

Business confidence plummets

The survey, according to Dr Wampah, also shows a softening of business and consumer sentiments.

The softening of Consumer Confidence was associated with the increases in utility and fuel price hikes. Businesses were also less optimistic about achieving targets for capital outlay, employment, sales and revenue.

 But Dr Wampah said though the pace of general economic activity slowed down relative to the last quarter of 2013, the index grew by 6.8 per cent year-on-year in the fourth quarter compared with a growth of 8.2 per cent for the same period in 2012.

The main drivers were port activities, deposit money banks, credit to the private sector, domestic VAT, exports and sales of key manufacturing commodities. GB