Banks in the country have been cautioned against the lingering sovereign risks associated with government financial instruments.
Speaking at an event organized by the Development Bank Ghana (DBG) and the Ghana Association of Banks (GAB), 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.
The Economist 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.
Focus On Productive Sectors To Boost The Economy
More so, Professor Osei-Assibey noted that despite the significant opportunities that exist in agricultural and manufacturing 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.
The Professor 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.
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