Increase in Utility Tariffs: Expect increase in policy rate - Financial analyst

Following the increase in electricity and water tariffs announced by the Public Utilities Regulatory Commission (PURC), a financial analyst, Dr Daniel Armateye Anim, has cautioned Ghanaians to anticipate a rise in the monetary policy rate.

According to him, although the hike in utility tariffs aims to reduce the shortfall in the energy sector, it is likely to escalate inflationary pressures due to the rising cost of living.

The business strategist explained that increasing the policy rate would lead to higher interest rates, which could discourage the private sector from borrowing at competitive rates for business expansion.

In an interview with GhanaWeb Business, Dr Anim said; "As much as one may agree with the International Monetary Fund that the government's decision to increase tariffs may address shortfalls, the challenge, or the other side of the coin, is that it could lead to an increase in the cost of living within the domestic space and may further heighten inflationary pressures. If that is the case, we should expect further increases in the policy rate. Extending the analysis, it could also lead to a rise in the cost of capital, which could hinder the private sector from borrowing at competitive rates for business expansion."

He added that; "I only hope that with the increases in tariffs, such as electricity and water, now in effect, the government will roll out mitigation policies to minimise the cost of living. This would ensure that citizens do not suffer excessively. Going forward, the managers of the economy need to expedite action to grow the economy to the extent that the cost of living, hardships, and challenges faced by citizens are mitigated and minimised."

In March 2025, the Bank of Ghana increased its policy rate by 100 basis points to 28% in an effort to curb inflation.

The Bank of Ghana Governor, Dr Johnson Asiama, attributed this decision to prevailing economic uncertainties influenced by external factors and rising inflation concerns.

The policy rate is a critical tool used by central banks to influence the economy.

It directly impacts borrowing costs for both consumers and businesses.

SA/AE

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