Private sector unhappy with BoG prime rate increase
Masahudu Ankiilu Kunateh, Ghanadot
Accra, Feb 25, Ghanadot - The Bank of Ghana (BoG) has
been heavily criticised for increasing the prime rate from 17% to 18.5%.
The prime rate informs the interest charged by commercial banks for their loans.
President of the Association of Ghana Industries (AGI), Mr Tony Oteng-Gyasi,
lashed out at the central bank saying the decision will rather stifle the growth
of businesses.
The Monetary Policy Committee of BoG on Tuesday raised the prime rate by the
1.5% in a bid to check the country’s soaring inflation which currently holds at
19.5%.
The bank stated that the strong demand for goods and services had impacted
negatively on the rate of inflation which demands an adjustment in the prime
rate to ensure a stable economy.
By the increase, borrowing levels are likely to decrease thus reducing the
amount of cash in circulation.
While Mr Oteng-Gyasi admits the bank has a duty to ensure stability of the
economy, he said the life of industry is also very important.
He said such an increase and trend would hurt manufacturers.
The AGI president urged the central bank to conduct a thorough research to find
out if earlier increases in the prime rate were able to check borrowing and
lending.
“Maybe we should look at the borrowing figures. Has it stopped the borrowing,
whose borrowing has it stopped in order to access it as a policy device,” he
said.
He maintained that industries must be offered flexible terms in their dealings
with commercial banks, adding that the central bank’s decision puts businesses
in a bad position.
A number of captains of industry that Ghanadot spoke to decry
the action of the Monetary Policy Committee, saying "we didn't expect further
adjustment in the prime rate because at the moment interests are high in the
West African sub-region".
A financial analyst, Ms Abena Amoah with the New World Renaissance Capital, said
the move by the central bank will slow down the growth of the economy.
She said the prime rate increase is likely to take the lending rate to above 30%
even for the most favoured bank customers.
Currently lending rates range between 26 to 33% per annum
with short term loans and instruments attracting up to 10% interest per month.
She said the surest way out of the mix is to stimulate supply “and you cannot
stimulate supply by making the cost of supplying goods higher."
Ghanadot
