Government cautioned against crowding out private sector finance

The Ghanaian government is crowding out the private sector in accessing finance through the issuance of treasury bills and bonds, a major worry expressed by industrialists.

Commercial banks today find it more profitable and risk-free to lend to government than to individual businesses.

The Ghanaian economic and financial environment has therefore become attractive enough for banks to make excessive profits without lending to the public – the cost of lending for private businesses therefore keeps shooting up.

Deputy Minister designate for Finance, Ricketts Kweku Hagan, at his vetting this week posited that the country’s high interest rates charged on loans is an attribute of deficits in government’s expenditure.

This is a major worry to industry, especially local manufacturers, who have had cause to prevail on the government to tread cautiously.

Robert Kwaakye Nketia, Chairman of the Association of Ghana Industries (AGI) in Ashanti and Brong Ahafo regions, particularly wants the government to heed to the automatic adjustment of fuel prices, which allows periodic price reviews for effective planning.

“If they do that it would mean that government will not ask money from the banks to finance its projects”, he said. “But if the government does not do that, always the government will go to the banks for money and lending to the government is safer but if they stop that then money will be available to industry to also tap in to grow”.

Mr. Nkatia has been speaking to Luv Biz Report at a forum to dissect provisions in the 2013 national budget statement, organised by the International Federation of Economic Journalists (IFEJ).

According to him, the Ghanaian economy should be on sound footing if government had factored most proposals of the AGI into the national budget.

Story by Kofi Adu Domfeh