Ghana must significantly increase its local production before exiting the International Monetary Fund (IMF) program. Seth Twum-Akoaboah, CEO of the Association of Ghana Industries (AGI), stated this to protect recent economic stability and investor confidence.
The AGI warns that without careful planning, the end of the IMF program could introduce new uncertainties. Boosting local production and decreasing reliance on imports will reduce Ghana's vulnerability to global economic shocks. This strategic shift is crucial for long-term economic resilience.
This advice comes as Ghana approaches the conclusion of its 3-year GHS 42.6 billion extended credit facility from the IMF. The GHS 60.1 billion Bank of Ghana Domestic Debt Exchange Programme ended successfully in September 2023. Ghana's economy has shown signs of recovery, with the cedi stabilizing against major currencies. However, the manufacturing sector has consistently faced challenges, including high interest rates and fluctuating global commodity prices.
Mr. Twum-Akoaboah emphasized the importance of maintaining investor confidence after the IMF's departure. "Going forward, we need to tread cautiously," he remarked. He added, "We've gained so much confidence in the system. We've encouraged people to invest now."
He further highlighted the critical role of domestic industry in sustaining these achievements. He stated the government has done well in managing the economy prudently, creating confidence. However, the implication of the IMF's exit needs careful consideration.
The AGI also identified limited access to affordable medium- and long-term financing as a major obstacle. Most financial institutions are not structured to provide the necessary support for industrial growth. Development finance institutions, such as EXIM Bank, Development Bank Ghana, and the National Investment Bank, need a review of their support for the productive sector.
Lending rates from these development institutions must reflect broader economic changes. For example, if commercial interest rates decline, their rates should also drop to support businesses. This would ensure industries get the funding needed to expand and innovate.
Ghana's push for enhanced local production aligns with efforts to diversify the economy beyond raw commodity exports. This will create jobs and reduce foreign exchange pressures. Sustained growth will depend on policies that foster a supportive environment for local businesses. This includes addressing financing gaps and streamlining regulatory processes.
Policymakers and market participants will closely watch the government's response to these recommendations. The effectiveness of post-IMF strategies will determine Ghana's continued economic stability and growth trajectory. Promoting local industries can help solidify the gains made during the IMF program.