Businesses View BoG Losses as Necessary Trade-Off for Macroeconomic Stability – AGI CEO Says
Ghanaian businesses are increasingly framing the Bank of Ghana’s 2024 financial losses as a necessary trade-off for restoring macroeconomic stability, even as concerns linger over the long-term implications for growth and fiscal sustainability.
This perspective emerged strongly during the NorvanReports and Economic Governance Platform (EGP) X Space discussion themed, “The Price of Stability: Did BoG’s Loss Deliver Real Gains for Ghana’s Economy?”, where Seth Twum-Akwaboah, Chief Executive of the Association of Ghana Industries (AGI), offered insight into how industry players are interpreting the recent development.
According to Mr Twum-Akwaboah, businesses initially paid little attention to the central bank’s losses, focusing instead on the visible improvement in macroeconomic indicators such as inflation and exchange rate stability. However, as discussions around the Bank’s financial position intensified, firms have begun to connect these outcomes directly to the interventions that led to the losses.
“Businesses did not previously focus on the Bank of Ghana’s losses,” he noted. “Their attention was on the improvements in inflation and the broader macroeconomic environment. But now, there is a growing understanding that these gains are linked to the interventions undertaken by the central bank.”
Ghana’s economic landscape between 2022 and 2023 was marked by severe instability, with inflation exceeding 50 per cent and the cedi experiencing sharp depreciation. This period placed immense pressure on businesses, many of which struggled to remain operational. In this context, Mr Twum-Akwaboah emphasised that firms view the central bank’s aggressive interventions – despite the financial cost – as essential.
“For businesses, stability was critical,” he explained. “At the height of the crisis, firms were collapsing. So if the losses were necessary to restore stability and keep businesses running, then many see that as justified.”
Nevertheless, this acceptance is conditional. Mr Twum-Akwaboah cautioned that while short-term losses may be tolerated as part of stabilisation efforts, their long-term consequences cannot be ignored. The sustainability of such interventions will depend on whether they translate into manageable outcomes for the central bank’s balance sheet and the broader economy.
“If those losses lead to unmanageable obligations or affect future stability, then it becomes a concern,” he said, highlighting the delicate balance between policy intervention and financial prudence.
On the question of whether the current macroeconomic stability is sufficient to support business expansion, Mr Twum-Akwaboah suggested that firms remain in a cautious, transitional phase. Rather than immediate expansion, businesses are focused on consolidating recent gains and moving gradually from recovery to growth.
He described this process as sequential – from crisis, to stabilisation, to consolidation, and eventually to expansion and transformation. At present, most firms are still consolidating, assessing whether the improved macroeconomic conditions will be sustained.
“There is interest in expansion,” he noted, “but it depends on whether the supporting conditions are strong enough and consistent.”
Data from the banking sector indicates a gradual shift in lending patterns, with more credit being directed towards the private sector as returns on government instruments such as Treasury bills decline. However, this shift has not been evenly distributed across sectors. While trade and services are benefiting from increased credit flows, manufacturing continues to lag, reflecting structural rigidities within the industrial sector.
“Private sector lending is improving,” Mr Twum-Akwaboah observed, “but manufacturing is still behind other sectors. There are structural challenges that need to be addressed.”
Despite banks showing increased willingness to lend, these underlying constraints must be resolved before businesses can fully leverage improved financial conditions to scale operations and drive industrial growth.
The overall sentiment among businesses, therefore, is one of cautious optimism. While the macroeconomic stability achieved in recent months is widely acknowledged and even linked to the Bank of Ghana’s costly interventions, firms remain watchful of its durability.
Ultimately, the acceptance of the central bank’s losses hinges on whether the stability achieved can be sustained long enough to support meaningful expansion, investment, and economic transformation.
