By Jibril Abdul Mumuni
Accra, July 12, GNA – The Bank of Ghana in its monetary policy report says lending to the private sector increased significantly in February 2023 to GH¢65.50 billion, compared with GH¢50.59 billion recorded in February 2022.
‘’Outstanding credit to the private sector at the end of February 2023 was GH¢65.50 billion, compared with GH¢50.59 billion recorded in February 2022. In real terms, private sector credit contracted by 15.3 percent compared with 1.2 percent contraction recorded over the same comparative period,’’ the report said.
According to the Central Bank, the development reflected portfolio reallocation by banks and exchange rate revaluation on foreign currency denominated credit.
Consistent with the economic growth rate where the service sector experienced the highest growth rate of 10.1 percent in the first quarter, the sector received the highest credit with a percentage share of 30 percent among other sub-sectors in the private sector.
The Central Bank observed that credit flow to the private sector remained concentrated on sectors, including services, import trade, manufacturing, mining and quarrying, and agriculture, forestry, and Fisheries.
Compared to the 84.9 percent recorded in the same time of 2022, private sector credit made up 86.4 percent of the overall flow of credit granted to both private and public institutions in February 2023.
Fitch Solutions also in its assessment of the Ghanaian banking sector predicted that banks’ lending activities would focus on private sector instead of the public sector owing to fiscal consolidation programme under the International MonetaryFund (IMF).
To that end, the rating agency indicated that banks would be more ‘’ selective’’ to the sectors they lend to, especially subsectors with high non-performing loans ratio.
It agreed with the Central Bank’s findings on lending to households and firms as demand for loans by firms and households experienced a net decline in the same month.
While the Central Bank blamed the decline in lending to households to a net decline in the demand for mortgages, the rating agency blamed it on rising interest rates.
GNA