Dr. Eric Boachie Yiadom, Senior Fellow at Africa Policy Lens (APL) and lecturer at the University of Professional Studies Accra (UPSA), has voiced concerns over the Bank of Ghana’s recent 300 basis points reduction in the policy rate.
He described the new rate as inadequate to resolve the high cost of credit faced by businesses.
Speaking to 3business on July 30, he argued that the policy rate should be closer to 20 percent rather than the current 25 percent to effectively stimulate economic activity.
The senior fellow at APL, highlighted that despite positive economic indicators including a 40% drop in the US dollar exchange rate since the start of the year, inflation falling by 41.7%, a 35% reduction in interbank rates, and a 60% decrease in Treasury bill rates ,the monetary policy rate remains disproportionately high at 25%.
He questioned the rationale behind maintaining such a rate when the economy is showing signs of improvement.
According to Dr. Boachie, “the high policy rate inflates the cost of credit for businesses, leading to expensive sourcing of materials and higher production costs”
This supply-side pressure, he warned, “could sustain inflation despite improvements on the demand side”. Furthermore, he noted that the high credit cost limits consumer purchasing power, potentially stalling market growth.
“He urged the Bank of Ghana Governor to consider lowering the policy rate further to stimulate both demand and production, arguing that increased credit availability would lead to more affordable goods and services rather than driving inflation up. Dr. Boachie pointed out that compared to regional peers like Nigeria—with inflation at around 22% and a policy rate of 27.5%—Ghana’s 25% rate with a lower inflation rate of approximately 13.4% appears disproportionately restrictive.
Highlighting the economic consequences, Dr. Boachie said the current approach threatens key sectors such as manufacturing, which has seen growth decline to 3.4%, and warned that continued high borrowing.
