Cut interest rates to 10% to revive business sector – GNCCI

Businesses across the country reeling the impact of COVID-19 have urged the government to cut interest rates to 10%.

By so doing, they could have access to cheaper loans to inject funds into their operations to survive and retain employees.

The Chief Executive Officer of the Ghana National Chamber of Commerce and Industry (GNCCI), Mark Badu-Aboagye, who made the appeal told theghanareport.com in an exclusive interview that as low as 10% interests would be ideal for struggling firms.

He said the COVID-19 pandemic was “a unique case so anything around the maximum of 10% for me will be very important”.

The government has sought to mitigate the impact with Finance Minister, Ken Ofori-Atta announcing an ongoing disbursement of GHC 600million for small and medium-scale firms being supervised by the National Board for Small-Scale Industries (NBSSI).

Additionally, Mr Ken Ofori-Atta announced in the mid-year budget review that the government has earmarked about GHC 2 billion guarantee fund for over 100 large-scale firms to access more capital for operations.

As he welcomed the financial support as “a laudable idea”, Mr Badu-Aboagye indicated that at the moment interest rates range from 25% to 35%, and “it is among the highest in Africa and even the world, the fifth-highest in the world”.

He pointed out that the government is only providing a guarantee with the loans but “we are also ready to have a discussion with the banks to make sure that the rate which they are giving to the businesses is also affordable and also will not affect their operations going forward”.

Monetary Policy Rate maintained at 14.5%

Following the detection of COVID-19 in Ghana, the Bank of Ghana (BoG) followed the trend of countries like the UK, Germany, and Australia which eased their Monetary Policy Rate (MPR) to increase liquidity in the economy.

The March 2020 meeting by the Monetary Policy Committee (MPC) resulted in a 150-basis-point reduction in the rate to 14.5%. Four months on, the BoG has maintained the rate as several measures are explored to lessen the impact, especially on jobs and livelihoods.

The Monetary Policy Rate (MPR) is the rate at which central banks lend money to commercial banks.

The policy rate is important to most businesses, as it determines the rate at which the central bank can lend to commercial banks and also influence the interest rate on loans.

A further cut will be welcomed by businesses making efforts to keep their heads above water in COVID-19 times.

Pay the contractors you owe – Gov’t told

With businesses facing a myriad of challenges, Mr Badu-Aboagye raised concerns about stalled payments by the government to suppliers and contractors in the last few months.

“it was hard for me to hear the Minister say that they are going to pay contractors. It shouldn’t be just lip service but they should really pay the contractors,” he stressed.

He suggested that not all businesses need to borrow more funds if “the government can decide to pay these contractor”.
“They may not need a loan but when you pay them the monies that are due them, I think they will be to be able to survive in this difficult moment,” he stressed.

Mr Badu-Aboagye applauded government for desisting from new taxes in the Mid-Year Budget and welcomed the slash in Communication Service Tax (CST) from 9% to 5%.

“In fact, because of the COVID-19, a lot of businesses are operating online to ensure safety and observe laid down guidelines,” he noted. “Most of the employees are still working mostly from their homes so data and airtime must be the norm and until recently, it has been part of the increasing cost of businesses”.