Per Joy Business report yesterday, the Cedi recorded the biggest loss last week, with a dollar selling for GHC16.40 as compared to about GHC14.74 as of 6th January 2025. Interest rates are rising, around 29% and our new Minister for Finance is set to borrow approximately GHC6.3 billion using short-term instruments (i.e., treasury bills) as he assumes office.
What does this mean for Ghanaians?
Interest rates will keep rising (and not decline!) as lenders will demand a higher premium for the increased risk they will bear for borrowing to a Government that does not have a clear plan for raising enough revenues to finance expenditure.
High interest rates imply an increased cost of borrowing for Ghanaians and a potential shutdown of many SMEs (destroying jobs and raising the unemployment rate), as any new investment for expansion they have planned to undertake will be costly for them to do so. Oh and let us not forget, the high cost of borrowing for local businesses, will also lead to lower productivity, implying lower tax revenue in the medium and Long term.
A further depreciation of the Cedi is equally expected as the Government may seek to reduce the debt burden through expansive monetary policy (i.e., an increase in the monetary supply). Finance Minister, let us into your bold solution of reducing our dear nation’s dependence on borrowing. You promised, so tell us! NB: Expanding the tax to GDP means nothing if you don’t tell us how you are going to do it!!