, Prof. Isaac Boadi, has raised concerns over the Bank of Ghana){kind=link}
The Executive Director of the Institute of Economic and Research for Public Policy (IERPP), Prof. Isaac Boadi, has raised concerns over the Bank of Ghana’s (BoG) decision to increase the policy rate by 100 basis points to 28%.
He argues that the move will worsen economic hardships for businesses and consumers.
Speaking on Bullet TV’s News Night with Nana Yaw Fianko (The Speaker), Prof. Boadi explained that policy rate adjustments directly impact borrowing costs, which banks, in turn, transfer to businesses and individuals. According to him, the latest hike means higher interest rates on loans, making it more expensive for businesses to access credit.
This, he warned, could reduce business investments, increase the cost of goods and services, and ultimately slow down economic growth.
“When the central bank raises the policy rate, commercial banks also increase lending rates. Businesses then pass the burden onto consumers, leading to higher prices and reduced spending power. The result is economic hardship,” – he explained.
He acknowledged that one of the primary objectives of increasing the policy rate is to control inflation, which currently stands at 23.1%. However, he questioned the effectiveness of this approach, arguing that it could have both negative and positive impacts.
“For businesses with high debt, this decision will be a major challenge, as they will have to borrow at higher costs. On the other hand, savers may benefit from higher interest rates on their deposits. But in a country where a significant number of businesses depend on loans for survival, the overall impact will be largely negative,” – he noted.
Prof. Boadi further suggested that the BoG could have considered other economic indicators before making such a decision, stating that high policy rates can hurt small and medium-sized enterprises (SMEs), which employ a large portion of the workforce.
“If businesses struggle to survive due to expensive loans, it will lead to layoffs and reduced productivity, which will not be good for the economy,” – he added.
While acknowledging the Bank of Ghana’s responsibility in stabilizing the economy, he emphasized the need for a more balanced approach to monetary policy to prevent further economic strain on businesses and consumers.
Ghana|Atinkaonline.com|Ebenezer Madugu