The Ghana National Chamber of Commerce and Industry (GNCCI) is advocating for a reduction in the policy rate to support business growth.

The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) is currently meeting to review developments in the Ghanaian economy, and an announcement on the policy rate is expected by Monday, January 29, 2024.

In a statement, the GNCCI highlighted that Ghanaian businesses are grappling with a significant increase in borrowing costs, mainly due to the high Monetary Policy rate.

It emphasized that the elevated interest on commercial loans, averaging 32.0% in 2023, compounds the already high utility tariffs and excessive taxes, making the cost of doing business in Ghana exceptionally high.

“The costly business environment has contributed to a significant decline in production, the collapse of many businesses; the rise in non-performing loans; the relocation of businesses to other African countries, and as a whole led to the significant decline in the growth of the private sector and the economy. From a GDP [Gross Domestic Product] growth rate of 6.1% in the 4th quarter of 2021 to 2.0% in the 3rd quarter of 2023”, it mentioned.

“As the representative body of the business community in the Country, the GNCCI is very mindful of issues that specifically impact the operational costs of businesses. With the 116th Monetary Policy Committee (MPC) meeting ongoing to discuss the policy rate adjustments, the GNCCI emphasizes the need for the review to favor the growth of businesses. The GNCCI urges the MPC to take into account the cost-push impact of a high policy rate”, it added.

Considering the relative stability in the forex market and the substantial decline of 30.4% in domestic inflation from 53.6% in January 2023 to 23.2%, implying that the Real Interest Rate in Ghana is now positive, the GNCCI proposed that the Bank of Ghana lowers the existing policy rate.

“We believe the reduction will induce commercial banks to also lower their lending rate to enable businesses to access funds for expansion in the short to medium term," the Chamber added.

“As Ghanaian businesses endeavor to actively engage in the AfCFTA, the cost of borrowing will play a crucial role in defining their competitiveness. With Ghana’s interest rate being the highest in Africa, we urge the Monetary Policy Committee to lower the policy rate. In the chamber’s estimation, anchored on the stability in the forex market, decline in inflation and the projected GDP growth rate of 2.7%, we propose a reduction of not less than 2 percent or 200 basis points in the policy rate for the start”, it continued.

The GNCCI concluded that it will continue to engage stakeholders in the public and private sectors to ensure a thriving business environment that delivers shared growth and prosperity for all.