Ahead of the announcement of a new policy rate by the Bank of Ghana on Monday, some economists are predicting a further drop in the policy rate.
Economist Professor Godfred Bokpin explains to Citi Business News, the reduction in interest payments due to the debt restructuring, should prompt a further drop in the policy rate.
He also argues that the restructuring of the energy sector debts will lead to increased supply of cash to the banks for onward lending to businesses hence the reduction.
“One other constraint to doing business especially from the production side of the economy is the short tenure of lending to the market… A rate reduction is more accommodating and that is what I expect that the MPC will do,” he told Citi Business News.
The Bank of Ghana in March this year reduced the policy rate from 25.5 to 23.5 percent.
This was the first time the rate was reduced that significantly after months of staying it at 26 percent.
Professor Bokpin tells Citi Business News a further drop will also propel employment.
“Once there is a complementarity between fiscal and monetary policies then we begin to signal a concerted hope to captains of industry that it will enable them to expand their businesses and expand and employ more people.”
MPC likely to maintain monetary policy rate at 23.5%
GN Research expects the Monetary Policy Committee (MPC) to keep the Monetary Policy Rate at 23.5%, due to a positive trend in inflation outlook, a stable currency, an improved investor confidence and the general positive outlook for the economy.
According to GN, the economic outlook for emerging economies remains positive with countries such as China and Brazil on a path of better economic recovery.
It also argues that on the domestic front, inflation increased marginally from 12.8% in March 2017 to 13.0% in April 2017, ending the six consecutive months decline.
Considering this factors (the external and the internal developments, Groupe Nduom (GN) Research expects the MPC to view the risk to inflation and growth as balanced and maintain the MPR at 23.5%.
By: Pius Amihere Eduku/citibusinessnews.com/Ghana