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23.09.2020 Business & Finance

‘Retaining Policy Rate Will Protect Businesses’ — Alhassan Andani

Alhassan Andani
LISTEN SEP 23, 2020
Alhassan Andani

President of the Ghana Association of Bankers (GAB), Alhassan Andani, says he does not foresee an increase in the policy rate anytime soon.

The policy rate determines the rate at which the central bank lends to commercial banks, which subsequently influences interest rate on loans.

Mr. Andani said the Bank of Ghana was likely to maintain the monetary policy rate to create an enabling business environment to help struggling micro, small and medium scale enterprises recover from the impact of the Covid-19 pandemic.

“I think the general posture I want to believe will be to ensure that we can have a quick and easy recovery. And, therefore, for businesses to access credit for the banks to have liquidity, but because of the slowdown in economic activity, GDP will be up to maybe 2%. I am sure the posture will be to ensure that the business environment is enabling enough for most of the SMEs and large companies to come back and start productions quickly.

“The context of doing that is always the supply of credit and how affordable the credit is. So I expect that they will hold the policy rate. We have seen some bit of pressure on inflation, but the good thing is that it's still within a range, so I suspect they will keep the policy rate [where it is at the moment],” he said.

He, however, explained that the current state of the economy does not support a decrease in the policy rate.

“At the moment, I don't think the fundamentals will support a decrease in the policy rate, especially when you still see inflation pressure. Also, we need to ensure that the exchange rate is pretty stable and it's maintained, and there is a fine balance between the two. Marginal borrowers would rather, where the interest rates are too low, use borrowed funds or their own funds to start doing things which would hurt the foreign currency, so I don't think the fundamentals are supporting a decrease of the policy rate,” he added.

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