The private sector is said to be having challenges in accessing the needed capital from banks to inject into their businesses because of the high cost of credit.
According to the Ghana Union of Traders Association and the Abossey Okai Spare Part Dealers Association, the high cost of credit is negatively affecting their businesses.
A data from the Bank of Ghana indicates that the excessive domestic borrowing by government is crowding out the private sector from getting loans.
Co-Chairman of the Abossey Okai Spare Part Dealers and Welfare Executive of GUTA, Clement Boateng appealed to government to help reduce the cost of credit for doing business.
“Current policy rate of the Bank of Ghana is about 14.5%, so even if we take facilities from the banks and they are expected to add their profits to their lending rate, we don’t expect them go beyond 20% and that is where we have a problem. If you give us a loan within the rate of 20-22%, I think that it will go a long way to help us. So our problem has to do with the rate at which they are offering the facility to us,” he noted.
The Summary of Economic and Financial data (January 2021) published by the Bank of Ghana has shown that the growth of total advances to the private sector declined to 5.8 percent in December 2020. This was from 23.6% the previous year, a sharp decline of 17.8 percentage points.
Meanwhile, the data further reveals that domestic debt, in nominal terms, increased by GH¢21.9billion within the stated period; recording GH¢147.3billion in December 2020.
Also, the rate of borrowing from domestic sources, as expressed by percentage to GDP, was higher in the last two months of the year, as it recorded 37.5% and 38.2% growth compared with the 36% and 36.2% respectively recorded for external borrowing.
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