The Ghana Union of Traders Association (GUTA) is predicting that banks’ default rate is going to be high due to recent hike in policy rate.
The Trade Union believes following the upwards adjustment of 24.5% in policy rate, more people will not be able to pay their loans.
The Bank of Ghana (BoG) on Thursday, 6th October, 2022 adjusted its policy rate from 22% to 24.5%.
The rate hike means it will become more expensive to borrow from the banks, a situation that will push the cost of living and doing business in the country further up.
The BoG said the upward adjustment will check the rising rate of inflation as the country negotiates with the International Monetary Fund (IMF) for an economic programme.
The Central Bank increased the policy rate by 2.5% on March 25, 2022, to 17%, and subsequently increased it on May 23, 2022, to 19%.
It again adjusted it upwards by 300 basis points to 22% in August 2022.
And now it has been increased to 24.5%.
President of GUTA, Dr. Joseph Obeng, commenting on it on Adom TV’s current affairs show, The Big Agenda, which was hosted by Abena Opokua Ahwenee, said “if the Monetary Policy Committee of Bank of Ghana says it is raising policy rate to check inflation, then they are wrong because we are not in a situation where money is chasing fewer goods but the kind of inflation we have now is cost pushed inflation due to rise in prices of goods and services.’’
He added that what the BoG has done means banks will also have to adjust their interest rate between 35, 36, 38 and 40% which is not good for business.
“This will add more cost to the already existing ones which will push inflation upwards again so the solution the Central Bank is giving is not, not, not,’’ Dr Obeng stated.
The GUTA President also charged those who now want to establish business not to do so as the situation they are in now does not favour new business as already existing ones are struggling to survive.
“If you ask me, how doing business in Ghana now looks like, I will tell those who want to do business to hold on as the current situation is not favourable. Existing businesses are struggling, our capitals are depleting so I will not encourage anyone to start business now,’’ he said.
Dr Obeng wants the Ministry of Finance and BoG to come together and find better ways of dealing with inflation rather than raising lending rates.