The Ghana Union of Traders Association (GUTA) has voiced its strong opposition to the recent upward adjustment of the policy rate by the Bank of Ghana, warning that it will worsen the cost of doing business and negatively impact the economy.
According to a statement signed by the Head of GUTA’s Business and Economic Bureau, Charles Kusi Appiah Kubi, any increase in the policy rate directly influences lending rates, leading to higher interest rates from commercial banks. This, the association argues, will add to the financial burden businesses are already grappling with.
“We are already saddled with high interest rates, which continue to increase the cost of production and doing business in Ghana. The question is, why does the central bank, through its monetary policy, want to increase the policy rate at this time?” he queried.
The statement also pointed out that key economic indicators such as Treasury bill rates, inflation rates, and policy rates should be examined carefully.
The association observed that while Treasury bill rates are declining due to the government’s efforts to consolidate fiscal expenditure and reduce borrowing, inflation remains high, raising concerns about the effectiveness of monetary policy interventions.
“The reduction in Treasury bill rates should have had a positive impact on inflation and policy rates, but that is not what we are seeing. Instead, businesses are facing increased economic challenges,” Kubi added.
GUTA also cautioned that the policy rate hike could worsen liquidity challenges for commercial banks, as non-performing loans (NPLs) continue to rise. The association warned that this may lead to banks being reluctant to lend to businesses, further stifling economic growth.
“The moment you try to arrest inflation through demand-pull measures, you risk driving inflation up instead. Our inflation is primarily cost-push, driven by high consumption taxes and borrowing costs. A better approach would be to reform the VAT system to reduce tax rates, which could lower the prices of goods and support disinflation,” Kubi suggested.
GUTA proposed alternative measures the government could explore to tackle inflation without hurting businesses. These include:
- Adjusting Treasury bill interest rates upwards to attract investment and mop up excess liquidity.
- Raising capital through Public-Private Partnerships (PPP) to finance capital expenditure instead of relying solely on borrowing.
- Strengthening the domestic bond market to provide long-term investment opportunities.
The association urged the government and the Bank of Ghana to adopt a more calculated strategy, balancing fiscal and monetary policies in a way that does not aggravate the already difficult business environment.
“We must be tactful and circumspect. Any policy intervention to mop up excess liquidity and control inflation should not further burden businesses, as this could have severe economic ramifications,” Kubi added.
