Deputy Finance Minister designate, Ricketts Kweku Hagan has attributed the high interest rates charged by banks to the country’s high budget deficits.
The country’s deficit hit 12% of GDP last year against a target of almost 7 percent.
The high deficit has been attributed to the implementation of Single spine salary structure, short falls in corporate taxes as well as utility and petroleum subsidies among others.
Mr. Hagan whose nomination is yet to be approved stated that till the country reduces its high budget deficits, interest rates will continue to be high.
Ghana has one of the highest interest rates in the world with average interest hovering around 24 percent.
The Bank of Ghana (BoG) and other stakeholders have been heavily criticized for not pushing the banks hard enough to reduce their rates.
But Mr. Hagan speaking at his vetting said till government expenditure is cut interest rates will continue to soar.
“As we continue to un-plan expenditure and we have a very high deficit the only choice we have is to go to the central bank to borrow on our behalf, this is by going to the market to issue treasury bills or bonds and basically doing what is called crowding out.”
He continued saying, “when they crowd then the money the banks have in savings to be given to you and I as business people will all go to the government. So when we become fiscally responsible and we don’t go to the market to borrow money there will be money for SMEs and also we don’t have to raise rates for treasury bills because the more governments goes to the market to borrow the more the rates will go high.”
According to him, it makes no sense “for a bank to give money to a risky individual when you can give money to the government or buy treasury bills which is risk free.”
By: Vivian Kai Mensah/citifmonline.com/Ghana