Keeping policy rate at 14.5% won’t have any impact on economy – Prof. Gatsi

Professor John Gatsi, an Economist at the University of Cape Coast has said the decision by the Bank of Ghana (BoG) to maintain the policy rate at 14.5 per cent will not have any significant impact on the economy.

He said it only gives commercial banks the space to decide whether or not to reduce their lending rate.

Apart from this, he said, Ghanaians won’t see any significant positive effect of the maintenance.

The BoG has maintained the Policy rate at 14.5 per cent for April 2020.

The central bank last month lowered the policy rate by 150 basis points from 16 per cent to 14.5 per cent.

Addressing the media Friday, the Governor, Dr Ernest Addison attributed this to some risk to the inflation outlook.

Dr Addison said, “The recent rise in inflation is projected to peak in the second quarter and begin to return to the disinflation path in subsequent quarters with inflation settling within the medium-term target band by the end of the year. On the growth outlook, baseline projections show a sharp downturn in GDP growth with the economy operating below capacity in the medium-term.”

Reacting to this in an interview on TV3’s News 360 Friday, May 15, Professor Gatsi said: “I don’t think it will have any significant impact except that it gives the commercial banks some space that they will not be forced to reduce their lending rates .”

Meanwhile, speaking about Ghana’s total public debt which has increased by US$300 million in March 2020 to US$43.4 billion as revealed by the latest March 2020 Bank of Ghana Summary of Economic and Financial Data, Professor Gatsi said the increasing debt stock makes Ghana fragile in the handling of the debts situation.

“The first quarter debt is supposed to be GHS15.6billion, and so we need to be worried.

“Because when you take the public sector financial management law, when we are assessing the critical effect of our financial management we are supposed to be looking at not only the debt stock, not only the debt to GDP ratio but we should also be looking at the wage bill to tax revenue.

“When we put all these together you will realize that we are in a very fragile and a very delicate situation when it comes to the management of our debt,” he said.