The Bank of Ghana (BoG) has written off 1.2 billion cedis Non Performing Loans (NPLS) on the books of banks in the country.
This means that the central bank will consider 1.2 billion worth of credit given out as bad loans that cannot be retrieved.
Non-Performing Loans was at 21.3 percent as at August 2018.
In the same period in 2017, the NPL was at 21.9 percent showing a drop on year to year basis.
Speaking at a press conference to announce the policy rate, the Governor of the Bank of Ghana, Dr. Ernest Addison stated that the move is necessary to reduce the high NPL level.
He explained that the banks have gone through all the required process to conclude that the loans cannot be retrieved hence must be taken care off.
“You have NPLs that are complete loss. The category of those that are completely bad. The bank has a policy. Once you have an NPL that are completely loss, you have to make full provision for them,” he said.
“Over the years the banks have fully provided for these loss component and we are saying that if you have fully provided for these losses maybe it is about time you wrote them off so that our NPL numbers can come down,” he added.
Dr. Addison stressed that the exercise is part of measures aimed at cleaning the financial system to make it a robust one.
BoG maintains policy rate
Meanwhile, the Monetary Policy Committee (MPC)of the Bank of Ghana maintained the policy rate at 17 percent after its 84th meeting.
This is the second consecutive time that the central bank has maintained the policy rate.
Speaking at the same press conference, Dr. Addison explained that the decision to hold the figure at 17 percent is aimed at helping the country achieve its inflation target by end of year.
“Given these considerations and weighing the balance of risks the committee decided to keep the policy rate unchanged but will continue to monitor closely developments in the coming months and take the appropriate policy actions to address any potential threats to the inflation outlook”, he said.
“The most recent forecasts, at this MPC round show some marginal elevation of the disinflation path taking into account the possible second round effects of the recent increases in petroleum prices, exchange rate depreciation, effects of recent increases in taxes, pick up in global inflation as well as the effects of the tight global financing conditions,” he added.
Responding to a question why the bank of Ghana did not increase the rate to help control the recent cedi depreciation, Dr. Addison stated that the focus of the central bank is inflation targeting and not exchange rate targeting.
Assuring that the cedi will stabilize, Dr. Addison pointed out that adequate measures have been put in place to stabilize the local currency.
“The outlook is for continued relatively stable macroeconomic conditions. The recently signed cocoa syndication loan of US$1.3 billion should bring in additional foreign exchange to further boost our international reserves and provide some cushion against any further pressures,” he stressed.