An economist at the University of Ghana, Dr. Ebo Turckson has called for a reduction in the monetary policy rate citing the adverse impact a continuous increase in the rate has had on the country’s private sector.
According to him, the Monetary Policy Committee (MPC) of the Bank of Ghana must be bold and reduce its policy rate to ease the burden on accessing credit in the country.
The MPC maintained its policy rate at 26 percent at the last meeting in March this year.
This followed an earlier decision by the MPC to maintain the rate the month before.
According to the committee, the decision was largely influenced by the prevailing inflationary trends and stability in the energy sector.
Speaking to Citi Business News ahead of the MPC meeting this week, 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. Since December 2011 when the rate started increasing from I think 11.5 or 12.5%, at no point have we reduced the rate up till the current 26%,” he stated.
The Bank of Ghana’s monetary policy committee is expected to commence its 70th meeting this Friday.
This will be concluded on Monday with a press conference to announce its prime rate.
The rate to be determined will also be used as basis by the various commercial banks to calculate their respective lending rates for granting credit to businesses.
This month’s meeting is also expected to centre on addressing the country’s macroeconomic challenges which hinges on taming inflation, maintaining the cedi’s stability, adhering to conditions of the IMF deal as well as a review of the country’s microfinance sector.
The decision will also tie in with the new governor’s key objective which is to work to reduce Ghana’s rising inflation.
Meanwhile Dr. Ebo Turckson believes government must end its borrowing from the domestic market in order not to crowd out the private sector.
“Apart from whatever is happening on the monetary policy committee end, we should also look at the fact that our cost of credit is tied because government is also borrowing and as we speak, we know that a three year bond is been sold almost at interest rate of 25%…Apart from that, the government is also crowding up the private sector by borrowing,” He noted.
Dr. Ebo Turckson added, “Infact government has that responsibility to create that environment for the private sector to flourish and if government is competing with them and crowding them up of the credit market which is a very important ingredient that they need to grow, then it means that the government itself is not helping us.”
By: Norvan Acquah – Hayford/citibusinessnews.com/Ghana