Sources of growth an issue with macroeconomic stability
IMANI, GIZ hold educational and policy forum
Economist, Dr. Priscilla Twumasi Baffour has outlined a number of key indicators that result in the high-cost credit in the country.
She explained although government is the safest borrower any investor can lend money to, government borrowing on the financial market, at a high-rate, results in the high cost of credit which impacts on credit access to the private sector compared to foreign investors.
Speaking at an IMANI Center for Policy and Education event on the topic; ‘Is Ghana’s Macroenvironment an enabler or Hammer to Attracting Investment’ the economist said,
“Because nobody else can borrow below at that rate so all these key indicators that send the signal and for investors, cost of capital is a key indicator because it influences the rate of return for any investment that is made. Within all that, macroeconomic stability and all other indicators play a key role”
“I am keen towards Foreign Direct Investment but I believe we also need to look at domestic investment as well because they all play a role when it comes to infrastructure that is needed to support investments and those are some of the issues, I believe we need to address,” she explained.
She further added that, the sources of growth indicators, have also been an issue in Ghana’s macroeconomic sustainability and development path.
“A good growth trajectory is an indicator for prospects and that is what Ghana doesn’t seem to struggle with. The sources of the growth has been the issue. So, growth is the country growing [with] income levels rising, rising middle class, it offers an opportunity,” she explained.
The economist continued, “Obviously, investors need some level of security, which we seem to have in the sub-region in terms of political stability, in terms of the exchange rates and the inflation, those are key elements because it tends to erode working capital of investment."
"Also, looking at the cost of credit, for example, you’d want to look at credit in terms of how much people can borrow within the domestic economy. When you look at some of those numbers and you compare Ghana to its contemporaries, you find that Ghana seems to have a very high cost of credit, and when you track the data to, for example, credit to the private sector, you see that, credit to the private sector is very low in the country because the cost of credit is high,” she pointed out.
