Kufuor urges commercial banks to cut interest rates

Accra, July 31, GNA - President John Agyekum Kufuor on Tuesday urged the Bank of Ghana (BOG) to prevail on the commercial banks to lower their interest rates to reflect improvements in the financial sector of the economy.

The commercial banks and non-banking financial institutions should be made to accept to operate with a balanced social and economic sense of purpose by charging conscionable interest rates, he said at the launch of the Central Bank's 50th anniversary celebration in Accra. President Kufuor described as "a bit odd" the situation where the strong performance and positive results of the economy were not being felt 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.

At the same time, a cut back on Government's domestic borrowing and debt forgiveness of about eight billion dollars 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.

"So far, the picture we have of the banks is one of riding on the backs of high interest lending to Government and corporate organizations. 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 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, it must demonstrate a heightened sense of social responsibility by ensuring that the banks competed on fair terms and reached out to all the localities.

It 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 to be felt in innovative ways. He said with the country's economy being mainly agricultural it could, in conjunction with the Government, use imaginative methods like discriminatory interest regime to get the banks to support the sector as well as small and medium enterprises development.

"The Government is determined to move this country into a middle-income status by the next decade. In this endeavour, it looks up to all state institutions, especially the Central Bank, for co-operation to drive and 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."