Reduce domestic borrowing, to curb banks’ appetite for securities – Government urged

Government has been urged to reduce its demand for funds from the domestic market to help reduce the overreliance of banks on government securities.

According to the Governor of the Bank of Ghana, Dr. Ernest Addison, in addition to government’s actions, factors such as the habitual non-payment of loans taken and the slow nature of Ghana’s judicial system in resolving banking sector issues, negatively impacts the quantum of credit given by banks.

The latest banking sector development report released by the Central Bank shows that growth in banks’ investment holdings outpaced other asset classes due to the higher propensity of banks to invest more in less risky government instruments as a result of the pandemic-induced elevated credit risks and slowdown in credit demand.

Investments in bills and securities shot up by 45.9 percent between February 2020 and February 2021, when the figure jumped from GH¢46.6 billion to GH¢67.9 billion, compared to the growth of 7.2 percent in the prior year.