Banks urged to invest in agriculture, manufacturing sectors; be cautious about Gov’t instruments
Banks in the country have been cautioned against the lingering sovereign risks associated with government financial instruments.
Banks have therefore been urged to shift their focus towards the agricultural and manufacturing sectors of the economy, which present significant investment opportunities, rather than government instruments that continue to pose sovereign risks.
Speaking at an event organized by the DBG and the Ghana Association of Banks (GAB) on April 13, 2023, Economist and Lecturer at the University of Ghana Business School, Professor Eric Osei-Assibey, stated that banks must remain mindful of the inherent risks associated with government instruments and take a cautious approach towards investing in them.
He urged banks to consider investing in the agricultural and manufacturing sectors, which have been underfunded in the past and require significant capital injections to spur growth and development.
The call to action by Professor Osei-Assibey is in line with recent efforts by the Ghanaian government to strengthen the country’s economic base by diversifying its revenue streams and reducing its dependence on commodity exports. The government’s domestic debt exchange program, which was initiated in 2022, is one of the key policies aimed at reducing the country’s debt burden and ensuring fiscal sustainability.
However, despite the government’s efforts to address its debt challenges, sovereign risks continue to be a major concern for investors in the country. According to Professor Osei-Assibey, banks must remain vigilant and cautious when investing in government instruments, as these risks could have significant implications for their operations and overall financial stability.
Instead, he urged banks to consider investing in the agricultural and manufacturing sectors, which have the potential to drive economic growth and create employment opportunities for the youth in the country. Professor Osei-Assibey noted that despite the significant opportunities that exist in these sectors, banks have traditionally shied away from investing in them, citing a lack of technical expertise and infrastructure as some of the reasons.
However, with the government’s renewed focus on developing these sectors, coupled with recent macroeconomic challenges, Professor Osei-Assibey believes that banks should consider redirecting their investments towards these sectors. He highlighted that with the right investment financing and technical support, banks could play a crucial role in strengthening the productive sectors of the economy, creating jobs, and ultimately building a more resilient economy.
Professor Osei-Assibey’s call to action highlights the need for Ghanaian banks to adopt a more strategic approach towards their investments and take into account the risks associated with government financial instruments. While the government’s debt exchange program is a positive step towards reducing the country’s debt burden, more needs to be done to stimulate growth in the agricultural and manufacturing sectors, which have the potential to create long-term sustainable growth and development for the country.
