Economist, Professor Godfred Bokpin, is warning of tougher times for the manufacturing sector if efforts are not stepped up to create a stable macro economy.
According to him, even though access to credit has increased following reforms in Ghana’s financial sector, the instability in the macro-economy has made it difficult for businesses to increase their scale of production.
Ghana’s economy has in recent times been characterized by an increasing inflation rate, high interest rates on credit as well as an unstable currency due to price volatility on the Forex market.
Professor Bokpin maintains these developments have made it a disincentive for commercial banks to give out long term credit to manufacturers.
Professor Bokpin however explains to Citi Business News, manufacturing can be saved from collapse with a stable macro-economic environment.
“If you deny financial institutions that predictability and stability so that they cannot price, then they wouldn’t want to lend for long. As a result, average maturity for lending is for twelve months but in the manufacturing sector, the average turnaround is about two to three years.” Prof. Bokpin noted.
“We are looking at extending the maturity tenure of credit to about three years in order to support the productive aspect of the economy because once we import, we are exporting jobs. In order to increase the productive capacity of industries, macro-economic stability is key.” He added.
By: Pius Amihere Eduku/citibusinessnews.com/Ghana