As part of proposals to redefine Ghana’s approach to fighting inflation, Deputy Managing Director of Fidelity Bank, Kwabena Boateng, has called for a transition from the traditional tool of raising interest rates to a more sustainable model that empowers businesses through capital market financing.
The deputy MD who was speaking at this year’s Money Summit, organized by The Business & Financial Times, challenged the long-standing reliance on interest rate hikes as the automatic means to curb inflation, especially in managing exchange rate volatility.
Although he admits that raising interest rates has its place in monetary policy, he stressed that Ghana must adopt more nuanced and long-term solutions, particularly ones that support small and medium-sized enterprises (SMEs).
“Traditionally, when we think about tackling inflation, especially its transmission through exchange rate volatility, the immediate policy response is often to raise interest rates. While this remains a valuable tool, it’s important to explore more nuanced and sustainable approaches, particularly for economies like Ghana,” he remarked.
Kwabena Boateng’s proposal centers on encouraging SMEs and large corporations to raise medium to long-term financing through capital market instruments such as bonds and equity, instead of relying heavily on banks.
By doing so, he said, Ghana can redirect domestic capital to more productive, growth-enhancing sectors, ease pressure on the banking sector, which often bears the full burden of financing, and reduce the inflationary risks that come with excessive credit expansion.
“Rather than rely solely on interest rate hikes to sustain credit growth, what if we actively encourage small and medium-scale enterprises, as the SMEs, and larger corporates, to raise medium to long-term financing through the capital market? That’s bonds, equity, and other instruments,” he recommended.
His remarks come at a time when Ghana, like many developing economies, faces the challenge of maintaining credit growth to stimulate the economy while keeping inflation and currency depreciation in check.
Interest rate hikes have proven effective in the short term, but they often lead to high borrowing costs for businesses, particularly SMEs, who are regarded as the backbone of Ghana’s economy.
Boateng believes that deepening the capital market offers a powerful alternative, allowing businesses to access long-term funds more affordably and reducing the risk of “overheating” the economy.
This proposal adds to growing calls for a more integrated economic policy framework that combines monetary, fiscal, and market-based solutions to achieve macroeconomic stability.
