Accra, May 25, GNA – The Bank of Ghana (BoG) says amidst the enormous macroeconomic challenges, Development Finance Institutions (DFIs) have a unique opportunity to be proactive and effective in the financial ecosystem, especially in Africa.
That, the Central Bank said could not be over emphasized as most African countries were faced with weak domestic revenue mobilisation and severe financial constraints, making it difficult to execute essential developmental projects.
Dr Ernest Addison, Governor, Bank of Ghana, in a speech read on his by Mr Osei Gyasi, Head of Banking Supervision, BoG, at the 2022 Annual General Assembly of the Association of African Development Finance Institution (AADI), said African economies were still grappling with adverse effects of the COVID-19 pandemic.
The 48th General Assembly of the AADI was hosted by the Nation Investment Bank (NIB) on the theme: “Unlocking Innovative Resources for Development Finance: Agenda for African DFIs.”
The General Assembly offers a unique opportunity to identify challenges relating to resource mobilisation, and device solutions for raising suitable development funding to support the growth of countries and the continent.
The Central Bank Governor noted that the pandemic had left several countries with limited fiscal space due to the policy response that resulted in huge budget-spending with limited budgetary allocation for other development projects like infrastructure, education, and agriculture.
He explained that DFIs, by their mandate, had the potential to bridge government financing constraints through the provision of the much-needed medium-to-long-term funding for development projects to promote job creation and sustainable economic growth.
Touching on the current macroeconomic challenges, Dr Addison said COVID-19 unleashed multiple shocks on the global economy, bringing several economies to a synchronised standstill and triggering a sizable economic contraction in 2020.
“The global response to the pandemic was massive and swift, comprising fiscal and monetary policies, and macroprudential measures to moderate the devastating effects,” he said.
He noted that the Russian-Ukrainian war had also imposed significant price pressures on the global economy as food supply-side bottlenecks deepened, promoting further policy rate hikes in the near term.
With higher borrowing costs, the interest rate hikes had triggered capital flow reversals and currency pressures in some emerging markets and developing economies and complicated the recovery process.
Furthermore, Dr Addison stated that the tightened global financial conditions had resulted in a sharp rise in public debt levels, imposing severe financial constraints and unstable macroeconomic environment in several emerging and developing economies.
He said to be able to deal with the emerging challenges of the global and local economies, the roles of the African DFIs must continue to evolve to reflect the continent’s economic development and transformation.
That, he observed, was to ensure that DFIs remained relevant to supporting the changing financing needs of African economies and that, in some instances, DFIs must continue to widen and diversify the scope of activities to cater for new financing needs in growth sectors, including Information and Communication Technology (ICT) and biotechnology.
Dr Addison said, in response to some of those changing macroeconomic dynamics, Ghana recently set up the Development Bank Ghana (DBG) with a mandate to improve access to medium and long-term finance for enterprises, particularly Micro, Small and Medium Size Enterprises (MSMEs).
Mr Samuel Sarpong, Managing Director of NIB, said being innovative in finding other financing avenues was highly critical for Development Finance Institutions as it was the only way to lift the continent out of poverty.
“The continent is plagued with many challenges, but I believe we are strategically placed to come up with smart solutions to finance and champion the industralisation drive of our respective countries and the continent as a whole,” the MD said.
Mr John Kumah, Deputy Minister for Finance, said DFIs played a significant role in promoting access to financial services and economic development as they were potentially potent policy instruments for fixing market values, incubating market markets and promoting structural transformation for realising higher economic growth.
Source: Ghana News Agency
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