[ 2016-05-17 ]

Ghana's economy isn't growing - Economist

An economist, Dr Kofi Orlins-Lindsay, says the
Bank of Ghana’s (BoG) decision to maintain the
monetary policy rate at 26 per cent is a clear
indication that the economy is not growing as
expected.


He said “if the economy was to be growing and
livelihoods were being improved, the BoG would
have reduced the policy rate.”

The policy rate, which has been maintained at 26
per cent since November last year, is the highest
lending rate over a decade now, despite three
separate review meetings held by the BoG's
Monetary Policy Committee (MPC).

Dr Orlins-Lindsay told Onua FM that the “the
high inflation is the main reason the BoG cannot
reduce the lending rate because a low lending rate
in this economic climate will push inflation
higher than current levels.”

A low lending rate is likely to reduce interest on
loans commercial banks give out to businesses to
expand their activities. However, businesses
complain that access to loan is currently
difficult and expensive due to the high interest
rates on loans by banks.

The 2016 first quarter Business Barometer Report
published by the Association of Ghanaian
Industries (AGI) ranked access to credit as the
fourth major challenge industry is facing in the
country.

High cost of utility, multiplicity of taxes and
exchange rate volatility were the only challenges
facing businesses that were ahead of access to
credit.

Economy under threat?

“Once government aims at achieving single digit
inflation, it is likely the BoG will continue
maintaining the policy rate at 26 per cent or even
possibly increase it if economic conditions
demands it,” Dr Orlins-Lindsay said.

The Monetary Policy Committee of the Bank of Ghana
(BOG) kept its policy rate at 26 per cent because
of macro economic conditions that could threaten
economic growth and inflation, the BoG said on
Monday.

Chairing his first MPC meeting since becoming
governor of BOG, Dr. Abdul-Nashiru Issahaku said
“in assessing the current economic conditions,
the Committee views the risks to inflation and
growth as balanced and therefore decided to
maintain the monetary policy rate at 26 per cent.


"The Committee remains committed to its price
stability mandate and will continue to monitor
developments in the economy and take further
policy actions, if necessary,” he added

He said “since the last meeting of the
Committee, there have been two readings of
inflation. Headline inflation rose to 19.2 percent
in March, from 18.5 percent in February. The sharp
increase in March was largely influenced by the
lagged effect of the upward adjustment in
transport costs.

“In April, however, inflation declined to 18.7
percent following a slowdown in non-food
inflation. The monthly inflation rates also
slowed, supported by stability in the exchange
rate,” the Governor said.

“There are, however, risks in the inflation
outlook. These include unanticipated upward
adjustments in utilities and petroleum product
prices and possibly second round effects from such
adjustments on prices. The slow but persistent
pickup in food inflation, since August 2014, is
also a source of concern for inflation.”

Moreover, “the growth outlook is broadly
positive contingent on sustained improvements in
the energy supply, continued stability in the
local currency and additional oil and gas
production. However, risks such as tight credit
conditions and continued tightness in the fiscal
stance may moderate the pace of economic
activity,” Dr. Issahaku said.

Source - tv3network.com|

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