A Deputy Minister of Trade and Industry, Dr. Stephen Amoah, has expressed worry about the consistent increase in the Bank of Ghana’s policy interest rate.
According to him, this is impeding the growth of trade and industry, since businesses are forced to borrow at higher interest rates.
He is therefore urging the Bank of Ghana to reconsider its inflation-targeting policy to control inflation. Speaking at the 2nd Financial Economic Seminar – Ghana on June 28, 2023, Dr. Amoah said the consistent increase in the policy rate has not help to stabilize prices.
“We keep on increasing policy rate and for that matter interest rate with the aim of reducing inflation rate. It’s been happening in Ghana for a long time and I have this argument that it sometimes unduly affects trade and industry”.
He added that “because if the inflationary rate occurs as a result of cost-push, you should be careful with the way you adjust interest rate or policy rate. Assuming our cost of doing business is going up and we know that one of the major cost variables is interest rates.
The policy rate went up by more than 10% in 2022 due to the significant increase in inflation and rapid depreciation of the cedi. This did not tame inflation and also stabilize the cedi
The Deputy Trade and Industry Minister continued “Hardly do you see a lot of people entering into equity finances/businesses. We often borrow from banks, for debt financing. So if you increase interest rates again what happens?”
We call something strategic drift when you have a strategy but it’s worsening. You’re challenged because the strategy does really fit in the actual programme you intend to achieve”, he added