Policy rate hikes will worsen business environment — GNCCI
The Ghana National Chamber of Commerce and Industry (GNCCI) has said the recent increase of the policy rate to a historical high of 29.5 per cent will worsen the plight of businesses in the country.
The chamber expressed concern that the continuous increase of the policy rate from 14.5 per cent in March 2020 to the current level was alarming and would have detrimental impact on the business climate in Ghana.
The Bank of Ghana last Monday increased its policy rate from 28 per cent to 29.5 per cent.
The Central Bank said the increase in its policy rate was to tame inflationary pressures, a situation many businesses have decried arguing that it makes the cost of borrowing too high.
The increase in BoG’s policy rate comes on the back of marginal decline in inflation rates from a record high of 54.1 per cent in December to 52.3 per cent at the end of February.
A release by the chamber stated that in the face of the challenges businesses have encountered over the past few years, including supply chain disruptions, reduced demand, cashflow challenges, and the recent upward adjustment of utility tariffs, the posture adopted by the Central Bank did not augur well in sustaining a conducive business environment.
“Majority of businesses including GNCCI members are struggling to break-even in their business operations which is critically undermining their competitiveness, with some manufacturing companies already citing production units outside Ghana to enjoy cheaper inputs.”
“The GNCCI holds the view that the recent hike in the monetary policy rate will exacerbate the challenges confronting businesses in Ghana, as it will result in higher borrowing costs and reduced investment, thereby hampering growth and employment prospects,” the release noted.
The release also noted that the policy rate would also have adverse effects on consumer spending, exchange rates and inflation expectations, consequently dampening the business climate in Ghana.
Furthermore, it said the proposed Excise Duty Bill and the Growth and Sustainability Levy Bill aimed at boosting government revenue would weigh heavily on businesses, posing significant obstacles to their performance, resilience and sustainability.
In light of these concerns, the GNCCI advocates policies that support businesses and help mitigate the negative impact of policy rate increase.
The Chamber’s proposals include providing targeted support for SMEs through financial aid and access to credit, as well as implementing measures that promote economic growth, such as increasing investment in infrastructure and other sectors.
The release, which was signed by the President of the Chamber, Clement Osei-Amoako, said importantly, macroeconomic policies must aim at strengthening the micro economy and not weakening it.
Furthermore, the Chamber believes that Ghana’s economic management challenges were partially attributed to an overemphasis on macro prudential programmes, and instead, the way forward lies in prioritising micro-economic diligence by implementing competition laws, structures and path-walking, value addition, and export development,” the release stated.