The Ghana National Chamber of Commerce and Industry (GNCCI) is actively urging the Monetary Policy Committee (MPC) of the Bank of Ghana to consider a reduction in the policy rate to support and stimulate business growth in the country.
As the MPC meets to review economic developments, the GNCCI highlights the adverse impact of the high Monetary Policy rate on businesses, citing increased borrowing costs and a challenging operational environment.
In a statement, the GNCCI expressed deep concern over the substantial rise in borrowing costs faced by Ghanaian businesses, largely attributed to the elevated Monetary Policy rate. The current average interest rate on commercial loans, standing at 32.0% in 2023, compounds the challenges posed by high utility tariffs and excessive taxes, collectively creating an environment where the cost of doing business in Ghana becomes exceptionally high.
The GNCCI underscored the severe consequences of the costly business environment, noting a substantial decline in production, the collapse of numerous businesses, an increase in non-performing loans, the relocation of businesses to other African countries, and an overall significant downturn in private sector growth and the economy.
The decline in Ghana’s Gross Domestic Product (GDP) growth rate from 6.1% in the 4th quarter of 2021 to 2.0% in the 3rd quarter of 2023 serves as a stark indicator of the economic challenges faced by businesses.
Call for Policy Rate Adjustment
As the representative body of the business community in Ghana, the GNCCI is actively engaging with the ongoing 116th Monetary Policy Committee meeting, urging the committee to prioritize the growth of businesses in its decision-making. The chamber emphasizes the need for a review that considers the cost-push impact of a high policy rate on businesses operating in Ghana.
“The GNCCI is very mindful of issues that specifically impact the operational costs of businesses,” stated the GNCCI in its release. Emphasizing the importance of favorable policy rate adjustments, the chamber calls on the MPC to take into account the economic challenges faced by businesses and the broader impact on the private sector and the country’s overall economic growth.
Given the relative stability in the forex market and the significant decline of 30.4% in domestic inflation from 53.6% in January 2023 to 23.2%, which also implies that the Real Interest Rate in Ghana is now positive, the GNCCI proposed that the Bank of Ghana lowers the existing policy rate, adding, “We believe the reduction will induce commercial banks to also lower their lending rate to enable businesses to access funds for expansion in the short to medium term”.
“As Ghanaian businesses endeavor to actively engage in the AfCFTA, the cost of borrowing will play a crucial role in defining their competitiveness. With Ghana’s interest rate being the highest in Africa, we urge the Monetary Policy Committee to lower the policy rate. In the chamber’s estimation, anchored on the stability in the forex market, decline in inflation and the projected GDP growth rate of 2.7%, we propose a reduction of not less than 2 percent or 200 basis points in the policy rate for the start.”
GNCCI
The GNCCI concluded that it will continue to engage stakeholders in the public and private sectors to ensure a thriving business environment that delivers shared growth and prosperity for all. The decision of the Monetary Policy Committee will be closely watched by businesses and stakeholders, as it has the potential to shape the trajectory of Ghana’s economic recovery and determine the extent to which the private sector can contribute to sustained growth and development.
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