The Ghana National Chamber of Commerce and Industry (GNCCI) has called on the Monetary Policy Committee (MPC) of the Bank of Ghana to make a significant reduction of at least 200 basis points in the monetary policy rate (MPR) at its upcoming meeting.
The move is aimed at rejuvenating struggling businesses and fostering economic growth, according to a statement issued by GNCCI President Clement Osei-Amoako.
Addressing the previous rate hikes aimed at curbing inflation caused by factors such as oil prices and supply chain disruptions, Osei-Amoako acknowledged the need for those measures but emphasized the adverse effects of the current 30 percent policy rate on domestic businesses.
“Ghanaian businesses are facing a considerable increase in borrowing costs, largely stemming from the high monetary policy rate,” stated Mr. Osei-Amoako. He highlighted the cumulative impact of high interest rates, averaging 32 percent in 2023, coupled with already elevated utility tariffs and excessive taxes, making the cost of doing business in Ghana exceptionally high.
Osei-Amoako pointed to visible signs of economic distress, including declining production, business closures, rising non-performing loans, and businesses relocating to other African countries, all of which are indicative of a challenging business climate.
The GNCCI President argued that a substantial interest rate reduction would not only revive private sector growth but also stimulate the private sector, a vital driver of economic growth. He expressed optimism that such a rate cut could help reverse the decline in the private sector’s contribution to the Gross Domestic Product (GDP), which had dropped from 6.1 percent in late 2021 to two percent by the third quarter of 2023.
In addition to making borrowing more accessible for businesses and incentivizing banks to reduce their rates, the GNCCI asserted that a 200-point reduction (2 percent) would enhance the regional competitiveness of local businesses.
The call for a rate cut is particularly relevant in the context of Ghana having one of the highest interest rates in Africa. A reduction in interest rates would be instrumental in improving the competitiveness of Ghanaian businesses within the African Continental Free Trade Area (AfCFTA).
As the nation awaits the outcome of the upcoming MPC meeting, stakeholders, including businesses and investors, are keenly watching for potential changes in the policy rate and their implications for economic growth and stability.