BANK OF GHANA policy rate hike promises real trouble
Prof. John Gatsi speaking to CNBC Africa said 200 basis points increase in the Bank Of Ghana policy rate is in response to risk to the economy, high inflation, weak financial intermediation and fiscal stress which will trigger lending rate hike. He explained that Bank Of Ghana maybe misdiagnosing the problem. He said the measures taken in an environment of volatile depreciation promises rather further inflation. He explained that high inflation and upward lending rate will undermine government contracts execution and create new levels of areas due to cost implications for procurement of materials. He said a number of projects maybe abandoned due to inflation, depreciation and cost of borrowing.
He warned that there maybe too much pressure on the banks as cost of mobilizing funds continue to increase with the possibility of distorted returns on placement of funds with the banks.