Accra, August 18, 2017//-Ghana’s President Nana Addo Dankwa Akufo-Addo has called on the Bank of Ghana (BoG) to vigorously address the current challenges of the country’s banking sector in order to guarantee financial stability and sustained economic growth in the country.
According to him, it was important for the BoG to entrench reputation and credibility in the financial system in order to accelerate government’s transformation agenda.
President Akufo-Addo made the call at the opening BoG’s 60th Anniversary Lectures and Exhibition held in Accra today.
The well-attended event themed: ‘Celebrating 60 Years of Central Banking in Ghana: Achievements, Challenges and Prospects’ drew the curtain down of the activities to mark the bank’s Diamond Jubilee anniversary.
He told the participants: “My understanding is that a road map for addressing banking sector weakness is being implemented. I urge you, as the nation’s Central Bank, to remain committed to the process and to address the challenges confronting the banking sector. This will not only guarantee financial stability, but also promote greater confidence in that sector”.
The President underscored the need for a stronger partnership between the government and the BoG to enable the Bank to play a pivotal role in formulating and implementing policies that would assure the economic transformation of the nation.
He maintained: “I want to stress that the current socio-economic challenges of our beloved Ghana demand that every hand should be on deck. I wish to reiterate my call for stronger partnership, as well as greater degree of policy coordination, between the Bank of Ghana and the Ministry of Finance.”
“This call is for the Bank, within its remit of operational independence, to play a pivotal role in formulating and implementing policies that will enable the economic transformation of our nation that we all desire”, according to him.
In his welcoming address, the Governor of Bank of Ghana, Dr Ernest Addison said the chosen theme for this anniversary celebrations, ‘Celebrating 60 Years of Central Banking: Achievements, Challenges & Prospects’, creates a platform for sober reflection on our past and what was achieved, and where we are heading as a central bank.
“We have a series of planned events which chronicles the evolution of the Bank of Ghana, including a high-level symposium on emerging issues that directly affect the Bank’s operations. We have also put in place an exhibition of old currencies, documentation and pictures to capture the Bank’s nostalgic memories”.
In line with the theme for the Anniversary, the managers of the Bank highlight some achievements as well as challenges faced in the execution of our mandate of price stability.
Dr Addison noted: “The historical roles of central banks in most developing countries, including Ghana, have been shaped by development strategies adopted over the period”.
Bank of Ghana is no exception and the Bank’s policies and activities have been shaped by changing political and economic conditions over the years.
In the foundational years, the Bank of Ghana Ordinance (No. 34) of 1957 clearly defined the role of the Bank to suit the prevailing circumstances which characterized optimism and aspirations associated with the country’s attainment of independence.
Consequently, the Bank of Ghana pursued proactive policies to foster the credit system, creating financial institutions as growth-promoting vehicles, while exercising the fundamental responsibilities of currency management and acting as the Government’s banker, he added.
Since then, the Bank has epitomized and embraced new thinking on monetary policy formulation, driven by those privileged to serve the Bank at the highest level.
It has been sixty years and the Bank is now operating in a different statutory and macroeconomic context.
Dr Addison explained: “To respond to changing domestic conditions and developments in central banking and monetary policy globally, the Bank of Ghana Act 2002, Act 612, which was passed to bestow operational independence on the central bank, was amended in 2016 to further reinforce and re-focus its policies and mandate on price and financial stability”.
“These two pieces of legislation marked a paradigm shift in the Bank’s operations and would continue to define the role of the Bank of Ghana going forward”.
On monetary policy formulation and implementation, the Bank he said officially adopted inflation targeting framework a decade ago, with the Monetary Policy Rate as the main policy tool.
“Over the past decade, the framework has helped lower inflation volatility. Prior to the implementation of the framework, inflation was highly volatile and hovered above 40 percent, but has since declined significantly and edging closer to the medium-term target of 8±2 percent”, he noted.
The IT framework introduced some clarity and transparency into the monetary policy formulation and helped anchor inflation expectations.
This aside, Ghana is a small open economy and hence vulnerable to adverse developments in the global economy, especially in the international commodity markets.
These vulnerabilities transmit to the domestic economy through the trade and financial sectors, posing major challenges to the macroeconomic fundamentals.
For instance, the past decade has witnessed significant turmoil in the global economy with rippling effects on international commodity and financial markets.
Because of the openness of the Ghanaian economy, such global shocks ultimately pose challenges to macroeconomic stability, which is a necessary condition for growth. Such events present immense challenges to monetary policy formulation and the Bank’s mandate of price stability.
The financial sector has also witnessed significant transformation over the years. From a few government-owned banks, the banking sector is now characterized by privately-owned banks with diverse countries of origin.
The sector continues to record asset growth and remains liquid, although some financial soundness indicators have weakened in recent times, raising concerns for financial stability.
For instance, the prevalence of high non-performing loans reduces liquidity which impacts negatively on profitability, and broadly obstructs transmission mechanism of monetary policy.
Instructively, The Bank of Ghana was established on the 4th March 1957, just two days before the declaration of political independence. The country is also celebrating its 60th independence anniversary. Ghana is the first black African country to throw off the yoke of British imperialism on 6th March 1957.
By Masahudu Ankiilu Kunateh, African Eye Report
