BoG introduces new measures to control inflation
The Bank of Ghana (BoG) has announced new policy measures to control inflation.
The new policy measures, which would take effect this month, are also to build a strong banking industry to promote financial intermediation mandate to support economic activities.
The Governor of BoG, Dr Ernest Addison, disclosed this during a press conference in Accra after the 117th regular meeting of the Monetary Policy Committee (MPC) of the BoG, saying the move was to mop up excess capital from the market to combat inflation.
He said the move was also to encourage the banks to support businesses more instead of investing in government instruments and bills.
Dr Addison observed that credit to the private sector by banks continued to remain weak.
“As at February 2024, private sector credit growth was 5.1 per cent compared with a 29.5 per cent growth recorded in February 2023. In contrast, as at February 2024, banks’ investments in Government
of Ghana and BoG instruments stood at GH¢53.6 billion, an increase of 67.6 percent year-on-year, compared with an increase of 36.9 percent for the corresponding period of 2023,” the Governor said.
Dr Addison said, “In real terms, credit to the private sector contracted by 14.7 percent, relative to a 15.3 percent contraction recorded over the same comparative period in February 2023.”
Under new policy directive, the MPC Committee decided to adjust the Cash Reserve Ratio (CRR).
He explained that banks with loan to deposit ratio above 55 percent would have to meet a CRR of 15 percent.
“Banks with loan to deposit ratio from 40 per cent to 55 per cent will have to meet CRR of 20 per cent,” Dr Addison stated.
He said banks with loan to deposit ratios below 40 per cent would be required to hold CRR of 25 percent.
Dr Addison disclosed that the banking sector’s performance had rebounded after the implementation of the Domestic Debt Exchange Programme (DDEP).
BY KINGSLEY ASARE
