Businesses decry marginal reduction in policy rate — 1% drop insufficient to stimulate growth
Mark Badu-Aboagye, CEO, GNCCI

Businesses decry marginal reduction in policy rate — 1% drop insufficient to stimulate growth

Businesses say the 100 basis point reduction in the monetary policy rate from 30 per cent to 29 per cent as announced by the Bank of Ghana (BoG), is insufficient to force interest rates down and stimulate significant business growth.

They explained that the effectiveness of monetary policy measures in fostering business expansion depends on their ability to lower borrowing costs and incentivise investment.

The Chief Executive Officer (CEO) of the Ghana National Chamber of Commerce and Industry (GNCCI), Mark Badu-Aboagye, told the Graphic Business that if the reduction in the policy rate does not translate into lower lending rates, businesses may not experience the desired level of growth and expansion.

The BoG reduced the policy rate by 100 basis points to 29 per cent as a result of what it described as macroeconomic indicators trending in the right direction. 

Before that, the GNCCI had proposed a reduction of not less than two per cent or 200 basis points in the policy rate for the start.

Mr Badu-Aboakye said “if the policy rate is that high as we had it at 30 per cent, a reduction of one per cent will not have any impact on lending rate.

Latex Foam Valentines Day Promo

The impact of policy rate reduction on businesses will be felt when it translates into a lower lending rate. This one per cent reduction is so insignificant that banks will not respond by reducing their lending rate.”

“Businesses will not benefit from this reduction, however, it shows a signal that in the subsequent Monetary Policy Committee (MPC) meetings, we are likely to see a reduction.

We appreciate the fact that the BoG heard our cry but we think the reduction is so minimal and businesses will not benefit from that,” he added.


Consequently, Fitch Solutions is predicting an 800 basis points decline in the monetary policy rate to 22.0 per cent at the close of the year. 

In its latest article titled “More Interest Rate Cuts On The Way In Ghana,” it said ”we believe that, following a 100 basis-point (bps) cut to 29.00 per cent in January, the Bank of Ghana (BoG) will lower the benchmark interest rate by an additional 700bps to 22.00 per cent by year-end.

“Inflationary pressures will continue to dissipate over the coming months, driven by the lagged impact of tighter financial conditions, statistical base effects and more favourable exchange rate dynamics, providing space for central bank policymakers to cut interest rates.”

Debt relief

Ghana's government recently achieved a significant milestone in its pursuit of debt relief by restructuring $5.4 billion of loans with its official creditors.

Despite defaulting on most external debt in December 2022 due to escalating servicing costs, the agreement with official creditors signals progress.

The move led to immediate disbursements, with the International Monetary Fund releasing about $600 million under its $3 billion bailout programme, while the World Bank approved $300 million in financing.

Ghana now aims to negotiate a relief deal with holders of approximately $13 billion in international bonds, highlighting its ongoing efforts to address its debt challenges.

Connect With Us : 0242202447 | 0551484843 | 0266361755 | 059 199 7513 |