Businesses in Ghana are facing immense challenges due to high interest rates, with the central bank’s policy rate remaining at 27% amidst rising inflation. This has forced many small and medium enterprises (SMEs) to abandon expansion plans or resort to expensive informal lending, hampering economic recovery.
Commercial banks are charging up to 35% on loans, which is suffocating business growth, especially in sectors like manufacturing and agriculture, where profit margins are already narrow. Industry leaders warn that sustained high interest rates are leading to more distressed businesses.
Kwamina Asomaning, Managing Director of ,, stressed that Ghana’s high interest rates are a significant barrier to growth, with inflation being the primary cause. He pointed out that inflation erodes purchasing power, making goods more expensive over time.
Additionally, non-performing loans (NPLs) are at alarming levels—between 24% and 35%—well above the World Bank’s recommended threshold of 10%. This situation is exacerbated by inefficiencies in the court system, which make it difficult for banks to recover collateral.
Government’s Role in Stabilizing the Economy
Asomaning welcomed the finance minister’s target to reduce inflation to 8%, but emphasized that the government must curb excessive spending, which is fueling inflation. He also opposed aggressive borrowing to finance investments, noting that countries in the West African Monetary Union are more stable due to conservative fiscal policies.
He called for fiscal discipline and sustainable economic growth, arguing that Ghana must focus on managing inflation and prioritizing long-term stability over rapid expansion.
Diversification and Growth Opportunities
Looking ahead, Asomaning advocated for economic diversification through sectors like tourism and agriculture. He cited the success of Ghana’s “Year of Return” initiative as an example of how tourism could boost foreign exchange. He also suggested creating support structures for other exportable commodities like cashew, mango, and ginger.
Agriculture and agri-business, according to Asomaning, offer “low-hanging fruits” that could help reduce Ghana’s dependence on cocoa and gold, ultimately fostering a more resilient economy.
Source :Graphiconline.com
