The Association of Ghana Industries has expressed its displeasure with the Bank of Ghana's recent raise in the policy rate to 19 percent, claiming that its members have been adversely affected by the increase, which has increased the cost of borrowing.
According to its Chief Executive, Seth Twum Akwaboah, the policy rate boost has pushed loan rates much higher and increased most industrial businesses' production costs per unit.
Mr. Akwaboah confessed to a cross-section of the media at the Arab-African Economy Summit that, while the raise in the Central Bank's primary lending rate is intended to curb inflation, it is having a significant impact on industry, particularly local firms. He went on to say that the policy rate rise will stymie the private sector's activity owing to high interest rates and credit costs.
"We realize that the policy rate is intended to restrain inflation, but the bottom line is that when such measures are implemented, the conclusion is clear: interest rates will rise dramatically." It gets to the point that banks are interested in investing in government bonds, treasury bills, and other government securities. It means the private sector's access to capital is being stifled," he explained.
Seth Twum Akwaboah also expressed concern that if the policy rate rise continues, it will likely drive a lot of company out of operations, thus impacting the economy.
"If we don't have an option but to pursue this strategy and it continues for an extended period of time, it will have a significant impact on enterprises and the economy," he bemoaned.
In terms of the association's future plans, he stated that his organization is working with the Central Bank to persuade commercial banks to lend loans to industry at a reduced rate.
"We must consider both the immediate and long-term consequences." We've been talking to the Bank of Ghana and will keep doing so. We will be able to resolve this amicably if we continue to interact," he continued.
In May 2022, the Bank of Ghana's Monetary Policy Committee increased its main lending rate by 200 basis points, from 17 percent to 19 percent.
The decision was made to assist manage increasing inflation, which has impacted most workers' disposable earnings.
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