BoG Governor Dr. Ernest Addison emphasizes importance of inflation control for economic growth

Dr. Ernest Addison, Governor of the Bank of Ghana, has underscored the central bank’s commitment to monitoring inflation as a critical component in sustaining economic gains.

He explained that as inflation falls to more manageable levels and interest rates decline, the demand and supply for loans to small and medium scale enterprises (SMEs) will increase, thereby driving economic growth.

Speaking at the Ministry of Finance (MoF) SME Growth and Opportunity Summit – 2024 on Tuesday, July 16, Dr. Addison remarked, “Just last week, the country successfully completed the Second Review of the IMF program by the IMF Board.

The Board reaffirmed the generally strong program performance and clear signs of emerging economic stabilization. However, noting substantial downside external and domestic risks, they underscored the importance of steadfast reform implementation to entrench macroeconomic stability and debt sustainability while fostering sustained growth and poverty reduction.”

Dr. Addison emphasized the importance of the Bank of Ghana’s role in maintaining macroeconomic stability, stating, “Sustaining macroeconomic stability requires the Bank of Ghana to continue to ensure that the BoG keeps an eye on inflation. When inflation declines to comfortable levels and interest rates begin to decline, demand and supply for SME loans will pick up and be a key driving force supporting growth.”

Recognizing the potential of SMEs in Ghana, Dr. Addison revealed that the BoG has commissioned a study in collaboration with the Development Bank of Ghana and the University of Ghana Business School. The study aims to better understand the constraints faced by SMEs and to formulate targeted policies for their growth.

“The objective of the study is, among others, to ascertain the economy’s SME credit demand needs, the supply of liquidity by these SMEs, and how FINTECHs could be leveraged to scale up lending by SMEs,” he said.

He noted that the University of Ghana recently presented preliminary findings based on a survey of over 500 SMEs, which have highlighted key issues within the industry. Dr. Addison expressed optimism that the positive developments in the economy, combined with the survey findings and sustained improvements in macroeconomic conditions, would benefit the SME sector in the long run.

“In what follows, I will discuss some specific innovations that the Bank of Ghana has implemented in recent years to support the SME sector,” Dr. Addison concluded, signaling ongoing efforts to foster SME growth and economic stability.