Reduction in policy rate great impact on the economy - Economist

Mr. Jerry Afolabi, an economist, has said the reduction in the policy rate announced by the Central Bank was laudable and will relieve business owners.

The Monetary Policy Committee of the Bank of Ghana yesterday [Monday, 27/3/2017] reduced the policy rate by 200 basis points to 23.5 percent from 25.5 percent.

Speaking to Kwame Tutu on Rainbow Radio 87.5Fm, Mr. Afolabi said, a high policy rate burdens businesses, prevents them from accessing loans at a higher rate hence, the reduction will prevent all these hurdles to reduce the cost of borrowing.

‘’When the cost of borrowing is low, the ripple effect is that, more people will get jobs to do, and businesses will expand. Businesses are unable to access cheaper loans when the policy rate is high-and that leads to job cuts, but when it is reduced, automatically, it will lead to economic development, production lines would be expanded and at the end of the day, government will get more returns.’’ Governor of the Central Bank, Dr. Abdul Nashiru Issahaku, cited favourable economic outlook for the reduction.

According to him, declining inflation rate and stabilising cedi as the reason for the reduction adding he was hopeful, it would help boost lending and stimulate growth.

Mr. Afolabi stated that the rate has reduced considerably and comparing it to other countries, we can say that it has been reduced considerably. ‘’Our policy has been considerably reduced.

It is not so high. Currently, it is still high but for the Central Bank to reduce it to 23.5 percent, I will say it is good. It will help to expand the economy, it will help individuals to access loans at a cheaper rate to set up or expand their businesses.’’