Despite the recent rise in the value of the cedi and decreasing inflation, which has allowed for reduced interest rates, high loan charges continue to hinder development within the private sector, according to Professor Godfred Bokpin from the University of Ghana Business School. He made these remarks during the Prudential Bank’s Cedi Appreciation Seminar held in Accra last week.
He warned that the continuation of high-interest rates could hinder company growth.
Commercial banks’ interest charges now vary between approximately 16% and almost 25%, although certain organizations provide loans starting at 12%. This represents improvement compared to the 32% high seen in 2020, yet Bokpin noted that the difference between the benchmark rate and actual loan rates indicates flaws within the financial sector.
The difference between a 25% interest rate policy and loan rates approaching 30% is excessively large,” he stated. “This indicates an inefficiency and imposes a burden on the system that needs to be resolved.
Nevertheless, Professor Bokpin praised the Bank of Ghana and the Ministry of Finance for their effective financial and monetary collaboration, which has significantly reduced inflation.
Consumer price increases have dropped from over 50 percent in early 2023 to around 12.1 percent this year, with predictions suggesting single-digit inflation will return by early 2026. Nevertheless, he emphasized that macroeconomic stability shouldn’t be considered an ultimate goal.
The instructor cautioned that maintaining high interest rates for an extended period might weaken competitiveness and hinder employment growth. He highlighted Kenya, where companies take loans at approximately 10 percent, as a comparison to Ghana’s situation.
He pointed out that we are preventing private investors from growing their businesses and creating jobs.
The economist also mentioned that although the stability of the cedi is positive, the speed at which it has appreciated has created challenges for companies that depend on consistent currency fluctuations.
Professor Bokpin called on decision-makers to make sure that benefits derived from financial responsibility, reduction of inflation, and monetary steadiness are converted into cost-effective funding options for companies.
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