Businesses and consumers in the country are finding it increasingly difficult to obtain credit from financial institutions as challenges in the macroeconomic environment have made banks wary of lending funds to the private sector, Bank of Ghana has said.

Studies undertaken by the Central Bank show that banks are gradually tightening their advances to both consumers and businesses, despite credit to the private sector going up by 28.2% at end of May 2014 as against 18.4% a year earlier.

The Governor of the Central Bank, Dr. Kofi Wampah noted: “The credit conditions survey conducted in June 2014 suggests tightening of credit stance for most loan types including consumer credit, SMEs, large enterprises and short-term loans.”

The findings come at a time the confidence of businesses in the economy has reached its lowest with the Private Enterprise Foundation (PEF) - the umbrella body of private businesses- describing the sentiments and mood of businesses in the economy as “horrible,” “Shocking,” and “deteriorating.”

The Central Bank in its Monetary Policy Committee report released on Wednesday also expressed concerns about the waning consumer and business sentiments as well as tightened credit conditions that could impact on the general economic outlook.

Currently, the Central Bank’s Policy Rate- which signals interest rate trends- has gone up for the second time this year from 18% to 19% as the Bank of Ghana moves to tighten its monetary policy in a bid to control inflationary pressures expected from the recent increase in utility tariffs and transportation costs as well as the depreciation of the Cedi.

Since the year began, the cedi has depreciated by about 26% against the US dollar while inflation has hit 15% in June from 13.5% at the start of the year, which puts the end year inflation figure of 9.5% out of reach.

Prices of petroleum products have been adjusted upwards by three times, which sums up to about 16 percent as a result of the slide in the currency.

The fall in the value of the Cedi caused the Ghana’s Public Utilities and Regulatory Commission (PURC) to hike utilities tariffs by 12% and 6.1% for electricity and water respectively.

Businesses also are now confronted with intense erratic power supply across the country, which has shot up their cost of operations.

Currently, banks are lending at rates between 27% and 30%. The cost of bank credit is now a nightmare of start-ups and businesses seeking finance for fresh investment. Comparisons are often made between the interest rates in Ghana and peer-countries such as Kenya, where the average cost of bank credit is 17 percent.

At the same time, high yields on government bills have provided a lucrative avenue for banks to invest in for an annual risk-free interest of 24 percent.

As of now, government’s public debt profile is at about 55.4% of GDP, while the budget deficit is in the double digits against end-of-year target of 8.5%.

A couple of weeks ago, credit rating firm, Moody’s, downgraded Ghana’s sovereign rating to B2 from Bl, citing the country’s rising debt burden and deteriorating debt affordability as the rating agency expected public debt to exceed 65 per cent of Gross Domestic Product (GDP) by the end of 2015 from 55.7 percent in 2013, mirrored by rising interest expenses relative to government revenues.