New Economy: Channel more credit into productive sectors – ISODEC urges gov’t, BoG

Policy Analyst at the Integrated Social Development Centre (ISODEC), Dr Adamu Braimah Abille, has called for stronger coordination between the government and the Bank of Ghana to direct more credit towards productive sectors of the economy, particularly agriculture, under the US$10 billion New Economy programme.

He says the concentration of private-sector credit in commerce and trade, rather than production, is undermining efforts to transform the economy and contributing to foreign exchange pressures.

Speaking in an interview with Umaru Sanda Amadu on Channel One TV’s The Big Issue on Saturday, November 14, Dr Abille said that although credit to the private sector had grown by 40 per cent, only 11 per cent of it went to agriculture.

“How much of this $10 billion will be coming from the private sector and how much will be coming from the public sector?  We were asking the minister to consider coordination with the central bank to show us how credit will be directed to the productive sectors of the economy.

“Our analysis shows that banks are not just financial intermediaries. When banks lend money, they create new credit. So where does this credit go? It has an implication for how the investments will be made,” he said.

“If you look at the credit to the private sector, it grew by 40 per cent, but inflation is still very stable. And the share of that credit to agriculture is just 11 per cent. The rest is going into commerce and trade,” he added.

Dr Abillle argued that the allocation of credit towards commerce and trade, instead of productive activities, was contributing to foreign exchange demand that the central bank had to manage.

He said the government must address the pattern as part of efforts to reduce Ghana’s dependence on imports and strengthen domestic production.

“That is what we want the 2027 Budget fundamentally to address,” he said.

Dr Abillle said ISODEC had asked the Finance Minister to work with the central bank to ensure that credit was channelled towards sectors capable of expanding domestic production and creating sustainable jobs.

He maintained that the success of the government’s economic transformation agenda would depend not only on budgetary allocations but also on how financial resources were directed into productive activities.

He also called for greater clarity on how the government intended to finance the investments under the New Economy programme, including the respective contributions of public funds and private-sector partners.

Dr Abillle said directing credit towards productive sectors would be important to achieving the structural transformation required to reduce Ghana’s vulnerability to foreign exchange pressures.

His comments follow Finance Minister Dr Cassiel Ato Forson’s presentation of the 2027 Budget Statement and Economic Policy to Parliament on Thursday, November 12, which outlined the government’s four-year, US$10 billion New Economy programme.

The programme is aimed at repositioning Ghana as a production-driven economy through investment in eight key areas, including commercial agriculture, energy infrastructure, critical minerals value addition, textiles and garments, pharmaceuticals and biomanufacturing, tourism, and the technology economy.