Introduction to Interest Rates
The Bank of Ghana’s Monetary Policy Committee has concluded its September meeting, and industry leaders are expecting another significant reduction in interest rates. Currently, the policy rate stands at 25 percent, which is still considered high by many businesses.
The Impact of High Interest Rates
High interest rates make it difficult for businesses to access capital for expansion. Tsonam Akpelo, Greater Accra Regional Chairman of the Association of Ghana Industries, emphasized that affordable credit is essential for Ghana’s economic recovery. He stated that high interest rates "make it nearly impossible to access capital for business expansion." Akpelo called on the government to continue lowering the policy rate to support businesses.
The Need for Affordable Credit
Affordable credit is crucial for businesses to scale their operations and generate employment opportunities. The manufacturing sector has directly connected its financing demands to President Nana Akufo-Addo’s 24-hour economy initiative, which aims to boost industrial output and create jobs for Ghana’s unemployed youth population. Akpelo explained that "achieving these ambitious economic goals requires competitive borrowing rates." Businesses need to access bank financing at rates that support growth rather than constrain it.
Economic Analysts’ Views
Economic analysts warn that the Monetary Policy Committee faces competing pressures that could limit aggressive rate cutting in the near term. Dr. Edu Owusu-Sarkodie, a prominent economist, acknowledged the case for monetary easing while highlighting potential inflationary risks from excessive loosening. He observed that "currency depreciation pressures and anticipated utility tariff adjustments create headwinds that the MPC must carefully consider."
Potential Rate Cuts
Dr. Owusu-Sarkodie projects a measured approach from policymakers, with potential cuts of 150 to 200 basis points that would bring the benchmark rate to approximately 23 percent. He noted that "despite calls for 500 basis point reductions, such dramatic action appears unlikely given current economic conditions." The central bank needs to balance the need to stimulate business investment through lower borrowing costs with the need to maintain price stability and currency confidence.
The Delicate Challenge
Ghana’s central bank confronts the delicate challenge of stimulating business investment while maintaining macroeconomic stability. July’s significant rate reduction energized business sentiment across multiple sectors, yet corporate leaders maintain that insufficient easing could derail the country’s economic recovery momentum. Monetary policy experts emphasize that overly aggressive cuts risk undermining recent progress in macroeconomic stabilization, particularly given external pressures facing emerging market economies.
Conclusion
The September MPC decision will signal Ghana’s monetary policy direction for the remainder of 2025, balancing immediate growth imperatives against longer-term stability concerns. Industry leaders and economic analysts will be watching closely to see how the central bank navigates this delicate challenge. Ultimately, the goal is to find a balance between supporting businesses and maintaining economic stability, which will be crucial for Ghana’s economic recovery and growth.
