BoG dismisses claims of profiteering from high interest rates

The Bank of Ghana has categorically denied allegations that it deliberately maintains high Monetary Policy rates to generate profits.

BoG’s clarification comes amid concerns from some quarters that the high interest rates are detrimental to the economic growth and profitability of businesses.

In an interview with Citi News, the central bank emphasised its commitment to implementing sound monetary policies aimed at achieving a stable level of inflation, in line with its medium-term target.

Bernard Otabil, Director of Communications at the BoG, dismissed the claims, stating that anyone making such allegations lacks a thorough understanding of central banking.

“Anyone who would make such a claim, perhaps, does not understand central banking fully because high interest rate is rather inimical to the operations of central banks. High interest rates rather raises the cost of our open market operations, and leads to large losses. But that’s the price central banks pay to achieve stable prices. Central banks are not commercial banks and do not seek profits, nor do they face the same financial constraints as private institutions. Central Banks, by the nature of their work, are supposed to provide a public good and that public good is low and stable inflation which comes at a cost. Indeed, a central bank can make losses, get into negative accounting equity and function effectively a loss does not imply loss of policy effectiveness. However, it is essential to recognise that central banks are mandated to provide the public good of low and stable inflation and cannot trade-off the policy objective of stable inflation with profits.”

Mr. Otabil explained that the central bank’s primary focus is on achieving stability, even if it means incurring losses.

“In most cases, central banks make losses because they are pursuing sound monetary policies to achieve stability,” he added.