An economist, Dr. Eric Osei Assibey has expressed disappointment at the Bank of Ghana’s (BoG’s) decision to maintain the Policy Rate at 26 percent.
The Monetary Policy Committee (MPC) of the BoG today announced that it has maintained the Policy Rate at 26 percent, the fourth consecutive time since January this year.
But speaking to Citi Business News after the announcement, Dr. Osei Assibey stated that the decision to maintain the policy rate at 26 percent will continue to affect the cost of borrowing, restricting the ability of businesses to expand.
“With the Monetary Policy rate been maintained, it means that interest rate will continue to be high. The average lending rate of 33 percent is one of the highest in West Africa , if not the entire of the African region, for me that rate is a lot of concern for this economy,” he said.
He was of the view that with the current harsh conditions that businesses go through, the committee could have reduced the rate to help interest rates come down for businesses to expand their operations.
“Businesses are reeling under difficult conditions. If you look at the fact that the business environment is not too conducive, utility bills have gone up, taxes are being raised, and if you also have to borrow at that rate, then of course we are not creating that kind of conducive environment for businesses to thrive,” he lamented.
Touching on the aggregate impact on the economy, Dr. Osei Assibey stated that the decision will negatively impact on growth.
“It will really affect the growth potential of this country, it explains why the growth trajectory is on a downward trend since 2012 because cost of borrowing is high, utility bills are high, and the business environment, generally is not that friendly,” he said.
He pointed out that business owners will always react to the Monetary Policy rate since it determines the rate at which enterprises access funds.
He appealed to government to use fiscal policy tools to encourage the business environment to grow since the decision will send discouraging signals to the business owners.
“I think that government and the monetary authorities should focus on how to encourage the real sector by ensuring that interest rate in particular falls, as it stands now it doesn’t look good for the private sector,” he said.
He noted that reducing interest rates will not only increase access to funds, but will also enable business owners to employ more people.
By: Lawrence Segbefia/citibusinessnews.com/Ghana