Professor Anthony Kwame Ahiawodzi, a financial economics expert, has expressed concerns about the impact of high inflation on Ghana’s financial sector.
He notes that the sector’s ability to mobilize savings and investment for sustainable economic growth is being hindered by high inflation.
Prof. Ahiawodzi made this observation during his inaugural lecture, where he analyzed Ghana’s banking, insurance, and capital market over two separate periods spanning 53 years.
He found that financial market efficiency has been inadequate over the years, despite some improvements between 1988 and 2023.
The lecture, titled “Assessing efficiency of the financial sector in Ghana, and implications for growth: an application of the Ahiawodzian model,” highlighted the need for a more efficient financial sector.
Prof. Ahiawodzi stated, “There have been improvements in financial sector inefficiency, which is an indication that successive governments have not thrown away financial sector reform programmes, but their best is not enough.”
He identified high inflation as the main factor preventing the financial sector from mobilizing adequate finance for business growth and expansion.
In an interview with the Ghana News Agency, Prof. Ahiawodzi further emphasized the impact of high inflation on the financial sector.
He stated, “The main factor making the financial sector unable to mobilise adequate finance to loan to businesses for growth and expansion was high inflation rate.”
He also mentioned other factors such as high interest rate, persistent depreciation of the Cedi against its major trading currencies, mainly the Dollar, non-prioritisation of development of the agriculture sector, and non-economic factors like lack of patriotism.
He reiterated, “The level of inflation is too high such that it has made the macroeconomy unstable, and that is reflected in the price level of goods and services.”
He encouraged the government to prioritize policy measures to reduce inflation, including effective implementation of programs like Planting for Food and Jobs and One District-One Factory.
Prof. Ahiawodzi commended the Bank of Ghana’s monetary policy measures but stressed the need to enhance the real and agriculture sectors.
He concluded, “Our main comparative advantage lies in agriculture, and we should be able to produce enough to first, feed ourselves, then the surplus is given to industry as raw materials.”
Story by: Michael Seh