Ghana has, for the past five years, consistently experienced a dwindling economic growth rate due to the limited role of the private sector in the economy, a Senior Lecturer at the Department of Economics at the University of Ghana, Legon, Dr Eric Osei-Assibey, has stated.
“When the interest rate is so high, about 33 or 35 per cent, that reduces access, and beyond that because of the high non-performing loans that the banking sector has recorded over the last five months, they are also beginning to contract loans, so when you look at the growth rate of credit to the private sector, it is on the decline,” he said.
Economy not expanding
Dr Osei-Assibey said the economy was not expanding because there was not enough access to funds by the private sector, which drove growth.
“When the interest rate is high, the payment of loans is very difficult. It has affected the supply of credit to the private sector, so where can the private sector get the money to spur economic growth? The growth rate had declined from 25.6 per cent to 8.5 per cent by June 2016,” he stated.
He indicated that the agricultural and industrial sectors had all experienced significant economic decline at 4.1 per cent and -5 per cent, respectively, in the second quarter of 2016, with only the services sector experiencing growth at six per cent.
He listed the challenges of the economy in a presentation, which was mainly on the International Monetary Fund (IMF) programme and which basically sought to answer the question of whether or not the nation was on a collision course with macroeconomic calamity.
Inflation, interest rate
Touching on inflation, Dr Osei-Assibey said that within the last five years, there had been between 17 and 18 per cent inflation, despite the very stringent monetary policy, including a consistent monetary policy rate of 26 per cent for 11 months.
“Even with low fuel prices, inflation remains very high. If it rises, the monetary policy rate will have to be adjusted and we will see the consequences of that,” he said.
The senior lecturer said from an interest rate of 23.5 per cent in 2012, the rate had soared to 33 per cent as of September 2016, which was one of the highest in the West African sub-region, compared to 15 per cent in Nigeria and 14 per cent in Sierra Leone.
He bemoaned the fact that the exchange rate of the cedi to the dollar had reached an average of GH¢4, which had implications for interest rates, imports and capital production.
Commenting on the fact that the rate had been stable for some time, he said it was due to loan inflows, which would not be available in the next four years.
“It is not a sustainable source of shoring up your currency and so if nothing is done in the next few years, we may get the exchange rate going spiral. An export drive is what can solve the exchange rate challenges, but it is not being addressed,” Dr Osei-Assibey stated.
Politics and economics
An Adjunct Senior Fellow of the IEA, Prof. Joseph Atsu Ayee, who chaired the discussion, called for more focus on economic issues because human rights were basic to economic issues, which also had a link to politics.
In his welcome address, a Senior Research Fellow of the IEA, Dr Michael Ofori-Mensah, said the roundtable was to promote economic development, with the private sector playing a key role, improve understanding of challenges and exchange healthy ideas and offer recommendations for the policies of political parties.