The Association of Ghana Industries is reiterating a further cut in the policy rate-the rate at which commercial banks borrow from the Bank of Ghana.
The policy rate presently stands at 14.5 percent, whilst lending rate hovers around 21 percent, a situation many believes is still high and increasing the cost of doing business.
Vice President of the Association in charge of small scale businesses, Hamphrey Ayim-Darke tells Joy Business a cut in the policy rate to a single digit will enable SMEs compete fairly with their Sub-Saharan African counterparts when the African Continental Free Trade takes off in January next year.
“Building capacity is the most crucial issue. And therefore we urge the Governor [Dr. Ernest Addison] that regarding the financial reforms that had taken place recently, it is our wish to see the policy rate drop to a single digit so that we can compete fairly with our Francophone countries who are our neighbors. And that becomes the basis for cost of funding being reasonable for the SMEs to build on their capacity,” he noted.
However, responding to a call by the Association of Ghana Industries to reduce the policy rate, Governor of the Bank of Ghana, Dr. Ernest Addison hinted of a possible maintenance of the policy rate and urged industry players to stay calm as the monetary policy rate will respond accordingly to fiscal measures implemented to deal with the economic challenges.
“We probably need to have patience to allow the system to consolidate itself and expect interest rate to go down consequently. I say so because if you look at the profile of policy rate over the last three years, we have consistently gone down on the policy rate till January this year when we stooped at 14.5%, and there are reasons why they have stayed there.
“You’re looking at the impact of the shock and the impact of the shock especially on the government’s finances and the budget. And I think that as we go into 2021, when the fiscal challenges are sort of moderated, one can expect the monetary policy rate to respond to those improvements,” he stated.
The Monetary Policy Committee of the Central Bank began its quarterly review meeting from Wednesday,18th November, 2020 and is expected to conclude the meeting today with an announcement of the Policy Rate on Monday 23rd November, 2020.
The 9th edition of the AGI Quality & Industry Awards was dubbed “Building Resilience and Local Capacity towards AfCFTA”.