Businesses and economic analysts have responded rather unsatisfactorily at the Monetary Policy Committee of the Bank of Ghana (BoG)’s decision to maintain its policy rate at 26 percent.
According to them, the prevailing economic conditions should have prompted the Monetary Policy Committee (MPC) of the Central Bank to reduce its prime rate rather than maintaining it.
The Governor of the Bank of Ghana, Dr. Abdul Nashir Issahaku on Monday announced that the MPC has maintained its policy rate citing the current inflationary trends and stability in the cedi as the basis for the decision.
Prior to the announcement, there were calls on the MPC to reduce the policy rate and cause commercial banks to reduce their lending rates on credit facilities to businesses.
An Economist Dr. Ebo Turkson said, “The cheapest rate you can get for credit in this country now is a minimum of 35%. So that is the point I am making that yes we are targeting inflation but with the inflationary expectation, the proxy members have no option than to either reduce or at least
keep the rate where it is,” he said.
Commenting on the decision by the MPC, an economist at the University of Ghana, Dr. Eric Osei Assibey said he was surprised at the move,
“Precisely so, because for some time now the cedi as been stabilizing against the major currencies and if you look at inflation, it has been reducing so I think the Bank of Ghana could have reduced the policy rate,” Dr. Assibey stated.
For his part, the Chief Executive Officer of the Ghana Chamber of Commerce and Industry, Mark Badu Aboagye contends that the move will compound the already difficult situation facing its members in accessing credit.
The chamber contends that banks are not likely to review interest rates on credit which continues to be a major challenge for businesses.
“As a chamber and private organization we were expecting a reduction in policy rate. As it stands now with the 26 percent, it is still among the highest in the world and which means that basically interest rates are going to remain the same. So we were expecting a reduction in the policy rate that will further force interest rates to go down. So we have to borrow at the rate that we are still borrowing at least 35 percent and the private sector is still suffering,” the GCCI CEO explained.
Mr. Aboagye also told Citi Business News the development will stifle the private sector’s contribution to economic growth.
“Infact the private sector is a game changer and that we have to do everything possible to make sure that we give the private sector the necessary support more importantly making funds available to the private sector at a more affordable rate,” he further observed.
Even though the Bank of Ghana has been missing out on its medium term inflation target of 8 percent plus or minus 2, Dr. Issahaku is hopeful the recent decision on the policy rate coupled with other decisions by the bank will enable it achieve its target by the end of 2017.
This he however said will largely be achieved barring any rise in the prices of petroleum products and utility.