The Bank of Ghana (BoG) has been heavily criticised for increasing the prime rate from 17% to 18.5%.
The prime rate informs the interest charged by commercial banks for their loans.
President of the Association of Ghana Industries (AGI), Mr Tony Oteng-Gyasi, in an interview with Joy News lashed out at the central bank saying the decision will rather stifle the growth of businesses.
The Monetary Policy Committee of BoG on Tuesday raised the prime rate by the 1.5% in a bid to check the country's soaring inflation which currently holds at 19.5%.
The bank indicated that the strong demand for goods and services had impacted negatively on the rate of inflation which demands an adjustment in the prime rate to ensure a stable economy.
By the increase, borrowing levels are likely to decrease thus reducing the amount of cash in circulation.
While Mr Oteng-Gyasi admits the bank has a duty to ensure stability of the economy, he said the life of industry is also very important.
He said such an increase and trend would hurt manufacturers.
The AGI president urged the central bank to conduct a thorough research to find out if earlier increases in the prime rate were able to check borrowing and lending.
“May be we should look at the borrowing figures. Has it stopped the borrowing, whose borrowing has it stopped in order to access it as a policy device,” he said.
He maintained that industries must be offered flexible terms in their dealings with commercial banks, adding that the central bank's decision puts businesses in a bad position.
A financial analyst, Ms Abena Amoah with the New World Renaissance Capital, said the move by the central bank will slow down the growth of the economy.
She said the prime rate increase is likely to take the lending rate to above 30% even for the most favoured bank customers.
Currently lending rates range between 26 to 33% per anuum with short term loans and instruments attracting up to 10% interest per month.
She said the surest way out of the mix is to stimulate supply “and you cannot stimulate supply by making the cost of supplying goods higher.”
Story by Fiifi Koomson