WORKING TOWARDS RECOVERY (JAN 27, 2010)

Many Ghanaians are not certain of their fate this year, although assurances have been given by the authorities that we are on the path to recovery.
Despite the modest gains chalked up by the managers of the economy, some of the challenges of 2009 are still with us.
Interest rates are still high, although inflation has fallen, and while the cedi has made strong gains against all the major currencies, business operations are still uncompetitive.
But if the Akan saying that “Se okyekye fi nsuo ase beka se odenkyem awu a, yennye no akyinnye”, to wit “If the alligator comes from beneath the river to announce that the crocodile is dead, no one doubts it”, is anything to go by, then the business community should heave a sigh of relief with the announcement by the Governor of the Bank of Ghana, Mr Kwesi Amissah-Arthur, that the central bank is working hard to further reduce interest rates.
Considering business reactions to especially the determination of the Bank of Ghana’s prime rate (which is the rate at which the central bank lends overnight funds to commercial banks in the country), we can trust and hope that the policy to cut interest rates will be forthcoming sooner than later.
With an average interest rate above 25 per cent and a spread of about six per cent, no meaningful business can operate and make profit with such soaring cost of doing business in the country.
The Daily Graphic has taken notice of the steady decline in government securities and the further lowering of inflation. It is, indeed, a good signal to all businesses and Ghanaians.
Ghanaians witnessed, not too long ago, competition for customers among the banks when the central bank abolished the secondary reserves requirement and the prime rate fell drastically to about 12 per cent.
Indeed, some policy think tanks, such as the Centre for Policy Analysis (CEPA), have questioned the inflation targeting policy of the central bank and rather called for a long-term policy in addressing the inflationary challenge in the country.
The current situation, whereby the government, in a bid to cut back on excess liquidity, uses the monetary policy, as reflected in interest rate hikes, therefore, needs to be looked at again.
Ghanaian businesses can only be competitive in an environment of lower interest rates that will enable them to source funds at competitive rates to expand their operations and create more jobs.
It is a fact that the interest rate regime in the country is the highest in the sub-region. Therefore, if we aim at making the country the financial hub of the sub-region and subsequently the gateway to West Africa, we need to adopt policies that will help businesses to grow and be competitive on the global market.
The Daily Graphic believes that the efforts of the government will come to naught if, at the end of the day, businesses operate in an environment where policies are not congenial for growth.
We, therefore, expect that the report of the MPC to be released in the coming months will signal the kind of policy initiatives that will further push inflation and interest rates down.
While the Daily Graphic trusts the good intentions of the Governor of the BoG and the government to deliver on their mandate, we must stress again that businesses and the government have a shared vision of creating opportunities for the people to achieve their aspirations through job opportunities and decent living.
The outlook for recovery looks quite bright and policy makers are encouraged to continue to provide the right policy interventions to improve the living standards of the people.