The government has been urged to introduce a scheme that will enable the Bank of Ghana (BoG), to give direct lower interest rate loans to selected productive businesses in the country.
Economists, Dr Daniel Anim-Prempeh and Mr Alhassan Andani, said doing so, enable businesses to increase their production capacities, and sell at affordable prices, thereby, stimulate the local economy, and improve living standards.
They spoke to the Ghana News Agency in separate interviews on recent developments in the economy amid the implementation of the country’s US$3 billion loan-support programme with the International Monetary Fund (IMF).
The Monetary Policy Committee (MPC) of the Central Bank kept interest rate at 29 per cent at its May 2024 MPC briefing, citing high global interest rate environment and a downward pressure on the Cedi as key reasons.
However, the Economists, said the current interest rate on loans were expensive for businesses, in particular, urging the government to ensure that it was brought down to support industrial growth.
Dr Anim-Prempeh, a Chief Economist with Policy Initiative for Economic Development (PIED), asked the government to ensure that the inflation and exchange rate gains seen in the past few months were consolidated.
“Most, importantly, the government must deliberately identify and support businesses that would propel growth, and come up with an initiative where the Bank of Ghana can give loans to businesses at 10 per cent interest rate for the next five years,” he said.
He recommended that the businesses in the agriculture value chain and the pharmaceutical industry could be targeted with such an initiative to make them expand their production beyond the borders of Ghana and attract foreign inflows.
That, he said, was necessary because many Ghanaian businesses had now resorted to buying from places like China to sell, rather than producing locally, due to the expensive nature of loans, which they struggled to repay.
The Daily Searchlight says;
We agree with the two eminent economists that interest rates in Ghana have been pegged at an unrealistically high level by the Bank of Ghana (BoG).
The Monetary Policy Committee (MPC) of the Central Bank kept the interest rate at 29 per cent at its May 2024 MPC briefing, citing high global interest rate environment and a downward pressure on the Cedi as key reasons.
The Daily Searchlight believes that the reasons cited by BoG for keeping the interest so high, cannot be legitimate. We believe that Ghana has every reason to consider other factors apart from global interest rates as the reason to set its own rates. The BoG should be considering factors as business growth and efficacy, ability to pay back loans and their complementary interest, and what Ghana intends to achieve and other factors, instead of looking at what is pertaining globally as the sole reason to set interest rates.
If the rates are efficacious, businesses, particularly profitable businesses, can borrow, produce, make profits and grow employment rates.
It is for this reason that we state that merely identifying special businesses to which to grant loans, is begging the question, instead of tackling the real issue, which is the unrealistically high interest rates.
The suggestion from the economists, in our opinion, would just create another avenue for the politically connected to raid the public treasury, and would eventually turn out not to be efficacious.
Rather, extreme pressure should be mounted on BoG to ensure that interest rates are brought down to a level that would enable businesses who need funds to borrow. Such a measure would lead to general access to the finance market, instead of creating a pinhole for a few to benefit.
