Governor of the Bank of Ghana, Dr. Ernest Addison, is urging the government to use the 2022 budget to reset fiscal policy and create a more credible path towards medium-term fiscal sustainability.
According to him, this is crucial to accelerate the country’s financial stability.
Speaking at the 10th edition of the Ghana Economic Forum (GEF), Governor of the Bank of Ghana, Dr. Ernest Addison, noted that an improved fiscal consolidation will also help in reducing the cost of credit in the country and ensure financial stability.
“A lingering problem has been private sector credit growth, which has not fully recovered to pre-pandemic levels due to uncertainties surrounding the pandemic’s trajectory. As the momentum in economic activity picks up, coupled with continued COVID vaccination efforts, and demand for bankable projects increase, we expect private sector credit to rebound. The relatively strong performance of the economy in spite of COVID-19 was due to home grown policy credibility that had been earned over four years of economic reform.”
“These measures placed the Ghanaian economy in a good place prior to the pandemic and the necessary policy space to undertake the countercyclical policies that allowed the economy to stay on course. The 2022 budget should be used to reset fiscal policy to create a more credible path towards medium-term fiscal sustainability. This would be an important building block to establish and entrench credibility, a key component to stability,” he said.
Dr. Ernest Addison also noted that the move will also see a rebound in private sector credit as there have been concerns over the disparity in the country’s revenue and expenditure which forces the government to borrow from banks, leading to a crowding out of the private sector as well as the prevalence of high-interest rates.
Dr. Ernest Addison, however, credited the strong resilience exhibited by the economy and the quick return to growth path amidst the ongoing coronavirus pandemic to credible home-grown policies.
He cited the National Financial Inclusion Development Strategy (2018-2023), the Digital Financial Services Policy (2020-2023), and the Cash-Lite Ghana (Building an Inclusive Digital Payments Ecosystem), as among some of the policies which laid the foundation for the economy to be able to withstand the pandemic shock.