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US-based Associate Professor of Finance at Andrews University in Michigan, Williams Peprah, is predicting a mixed development for the country as a result of the increase in the US interest rate to 3.75%.
The Federal Reserve yesterday increased the benchmark rate to its highest in 14 years.
The bank hopes pushing up borrowing costs will cool the economy and bring down price inflation.
According to Professor Peprah, the increase in interest rate would make investing in the US economy better than Ghana, leading to capital flight and a stronger dollar.
“An increase in the interest rate by US Federal Reserve by 0.75% to 3.75% will impact Ghana’s economy both negatively and positively. The negative side is that it will lead to capital flight and a reduction in foreign direct investments into the country and the dollar will become stronger; and you may see the cedi devaluing more or faster”.
“Should Ghana be able to attract investors into the country, you may have to be able to compensate or give higher returns of more than 3.75% [dollar rate] to investors.
Dr. Peprah further stated that the goods and services from the USA to Ghana will also become expensive as their cost of credit will become expensive.
However, he believes an increase in Ghanaian exports will positively impact the economy.
“The positive side is that it will make Ghana’s exports cheaper”.
Source: myJoy
