Economist Dr. Peter Terkper has urged the Bank of Ghana’s new leadership to prioritize stabilizing the cedi and addressing high interest rates, which continue to burden businesses.
While acknowledging the Central Bank’s role in managing monetary policy, he emphasized that government policies on imports and spending must be aligned to reduce the depreciation of the cedi.
Dr. Terkper also pointed out that many businesses are facing significant challenges, with over 35 percent of their profits going towards loan repayments.
He called on authorities to implement strategic measures that would improve liquidity and relieve financial pressures on the private sector.
“One of the biggest issues that he has to focus on is the currency, and that is solely at the doorstep of the central bank because the central bank manages the monetary aspect. But there are other factors that contribute to the currency depreciation, and that means that government policy has a role to play.”
“So if government policy is not tightening and restricting people from importing, then that’s going to be the challenge that is going to face. And so currency management is one of the key teams he has to look at. Also, the availability of the currency. And so we are hoping that they will look at the strategy within the central bank. We’ll be able to get more liquidity available in the market to reduce the perennial depreciation.”
“Then, when it comes to interest rates businesses are having a tough time. If you are working as a company, as a business person, and then you are spending over 35 to 40% of your profit on interest payment alone, when other costs haven’t come yet, then definitely businesses are going to struggle, especially in an economy where businesses have suffered over the last two, three years.”
Dr. Terkper, however, warned that high Treasury bill rates and inflation are driving up interest rates, making business financing costly.
“One biggest area is treasury bill, because treasury bill is normally seen as the benchmark for which loans are priced. That bank determines the pricing, and if you look at the current system we have, there’s a benchmark rate called the internal reference rate.”
He said, “And so if the Treasury bill rate is high, that is, the government is borrowing at a high rate, then certainly you should expect that the banks will also do so because everybody will be benchmarking it. So the question is, why should the Treasury bill keep going up when the government is a sole borrower?
Can’t the government reduce it so that the benchmark that is being used can also reduce the rate from the bank as well to the companies? Because it’s really a killer for the business. The government also have to look at how to tame inflation. If this is managed properly, then all these indicators will also go down. And I think that when it happens, it will put the economy on a very moderate level for everybody to do business-friendly.”
