Local business owners are lamenting over government’s excessive borrowing from the domestic market, describing it as a development that locks out the private sector from accessing funds from commercial banks.
Already, the Bank of Ghana has issued a 500 million cedi domestic bond on behalf of government, but captains of industries across the country say the move is crowding out the private sector.
“Government should stop competing with the private sector at the commercial banks so that they (banks) will find it necessary to give funds to the private sector at a lower cost”, President of the Ghana Chamber of Commerce, Seth Adjei Baah told the Business Day.
Mr. Baah revealed that the situation has compelled business owners to borrow from micro finance institutions at an abnormal interest rate of 72 percent per annum due to the general instability in the economy.
“Most of our people are within the SMEs and don’t have access to commercial banks to get loans so they go to micro finance institutions for funds at six percent per month”, he said.
He explained that commercial banks are unwilling to release funds to the private sector, mainly due to government’s decision to borrow from the domestic market which appears safer to the banks.
The situation, he said has resulted in banks releasing funds to just a few importers who are able to make some margins in the short run to pay back the loans.
According to him, local producers are suffocating from high cost input while they face a bigger challenge from importers who bring cheap products into the country.
“This will not help the economy”, he stressed, adding that “the private sector is being crippled because of the challenges that we are facing”.
He pointed out that the sector is already battling with the increase in utility tarrifs and the recent fuel price increases.
“Now our taxes have been increased and it is an indication that the private sector is not priority. We say the private sector is the engine of growth; if the engine is not oiled enough how do we grow”, he asked
Mr. Baah appleled to government to further reduce the withholding tax on services to the initial five percent to cushion industry players.
The Withholding tax on services was increased to 15 percent following the implementation of the new Income Tax law passed in 2015 but was slashed to 7.5 percent after a public outcry.
