Ghana’s Bold Rate Cut: Policy Catch-Up or Premature Pivot?

A 300 basis point cut in the policy rate, from 28% to 25%, is substantial by any standard — especially in an economy with persistent exchange rate fragility and a history of inflation volatility. 

Ghana’s Bold Rate Cut: Policy Catch-Up or Premature Pivot?

On 29 July 2025, the Bank of Ghana (BoG) announced a bold 300 basis point cut in its benchmark policy rate, lowering it from 28% to 25%. This marks one of the most aggressive loosening moves in recent years and signals a strong vote of confidence in Ghana's ongoing macroeconomic recovery.

However, beneath the surface of this headline decision lies a complex landscape of structural dislocations, liquidity mismatches, and market distortions. The core issue is no longer the availability of liquidity but rather the alignment of policy signals with market realities.

1. The Disinflation Success: A Justification for Easing?

Inflation has moderated significantly to 13.7%, down from the crisis peaks of 2022. This disinflation reflects coordinated fiscal tightening under the IMF programme and prudent monetary measures that have curbed demand-side pressures.

From a textbook perspective, the sharp fall in inflation would justify a monetary policy pivot towards easing. Real interest rates had become severely positive, stifling private sector credit and dampening post-pandemic recovery prospects.

But is the rate cut catching up with market dynamics, or is it a premature easing in a structurally fragile environment?

2. Liquidity Is Abundant, But Lending Rates Remain High

The Ghanaian banking sector is currently flush with liquidity:

• 91-day Treasury bill yields have dropped to 10.29%.

• The interbank lending rate is reportedly below 15%, far beneath the official figure of 24%.

• Recent Treasury bill auctions saw oversubscription rates exceeding 85%.

Yet, paradoxically, lending to the private sector has not expanded meaningfully. Banks, grappling with excess cash, are reluctant to accept fixed-term deposits and are actively shifting towards cheaper current account balances. However, the cost of borrowing for businesses and consumers remains prohibitive.

3. The Ghana Reference Rate (GRR): A Structural Bottleneck

At the heart of this disconnect is the Ghana Reference Rate (GRR) — the benchmark that governs lending rates. The GRR is calculated using the following weights:

• Monetary Policy Rate (MPR) – 40%

• Interbank Rate – 20%

• 91-day Treasury Bill Rate – 40%

Given the current configuration, the high MPR disproportionately influences the GRR, keeping it elevated at around 23%, despite market indicators suggesting significantly lower cost of funds.

This rigid formula effectively locks in high lending rates, impeding credit transmission and stifling economic recovery.

4. The FX Market Premium: A Persistent Vulnerability

Another critical challenge is the persistent divergence between official and parallel market exchange rates. Despite disinflation and liquidity improvements, speculative pressures and structural FX shortages keep the Cedi under stress.

A rapid rate cut could exacerbate these pressures by reducing the real return on Cedi-denominated assets, incentivising capital flight and dollarisation.

5. The Strategic Trade-offs for Monetary Policymakers

Policy Imperative	Risks and Constraints
Align MPR with market-based rates to reduce GRR	Risk of undermining monetary anchor and fuelling FX volatility
Support private sector credit and economic recovery	Potential unmooring of inflation expectations if easing is too aggressive
Maintain investor confidence through credible forward guidance	Requires robust FX interventions to manage liquidity spill-overs

6. The Path Forward: Policy Choices for the MPC

The BoG and its Monetary Policy Committee (MPC) face a delicate balancing act:

1. Accelerated Policy Realignment: Gradually lowering the MPR towards the sub-20% range to synchronise with evolving market rates, while managing expectations through clear and conditional forward guidance.

2. Structural Reform of the GRR Framework: Recalibrating the formula to reduce the over-reliance on the MPR weighting, allowing market-based rates (interbank and T-bills) to play a more significant role in determining lending rates.

3. FX Market Unification Strategy: Enhancing transparency and liquidity in the FX market to narrow the official-parallel market premium, thus reducing speculative incentives.

4. Sterilised Interventions: Conducting open market operations to manage excess liquidity, ensuring that rate cuts do not translate into unchecked currency depreciation.

5. Strengthened Fiscal-Monetary Coordination: Maintaining discipline on the fiscal front to support the BoG’s policy credibility, while ensuring programme targets under IMF supervision are met.

Conclusion: The Imperative of Policy Alignment

Ghana’s economy does not lack liquidity. What it lacks is policy alignment and transmission efficiency. The BoG's recent rate cut is an essential step, but without structural reforms to the Ghana Reference Rate and a coherent FX unification strategy, the benefits of easing will remain muted.

The next phase of policy action must decisively address these bottlenecks. The challenge is not merely to adjust rates but to ensure that monetary policy becomes an effective tool for real sector revitalisation.

The future of Ghana’s economic recovery depends on it.

This article integrates insights from "Why Are Interest Rates Still High? The MPR vs Market Rates Debate" originally shared via https://www.facebook.com/share/p/16cAp8MrFp/.

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Can the Ghanaian Cedi Anchor a New West African Currency Bloc?

 Can the Ghanaian Cedi Anchor a New West African Currency Bloc?

By M Harry Yamson | Accra

As dissatisfaction grows with colonial-era institutions and political realignments reshape West Africa, Ghana may be well-positioned to consider a bold, if unconventional, economic proposition: anchoring a new regional currency bloc based on the Ghanaian cedi.

The idea is radical, but not without historical precedent or strategic logic. Ghana, Guinea and Mali once sought a political and economic union in the 1960s under the visionary leadership of Kwame Nkrumah, Ahmed Sékou Touré, and Modibo Keïta. That effort failed—but the impulse toward regional autonomy and integration endures. Today, amid new geopolitical fissures, the conditions for revisiting such an ambition may be re-emerging.

At the heart of the proposal is a partnership between Ghana and the military-led states of Mali, Burkina Faso, Niger and Guinea—all of whom have expressed a desire to leave the CFA franc, the euro-pegged currency zone backed by France. The cedi-based alternative would offer these countries monetary sovereignty, while potentially transforming Ghana into a linchpin of regional trade, logistics, and finance.

Strategic Logic and Economic Incentives

Ghana brings to the table institutional stability, a functioning democracy, an independent central bank, and a track record—albeit imperfect—of managing its own currency. Its coastal geography provides landlocked partners with access to global markets through modern port infrastructure in Tema and Takoradi. Leveraging these advantages could unlock cross-border value chains in mineral exports, agricultural commodities, and manufacturing.

The economic case for a cedi-based zone includes lower transaction costs, harmonised trade settlements, and greater control over fiscal and monetary tools currently constrained under the CFA regime. Ghana, in turn, would benefit from expanded market access, economies of scale, and increased geopolitical influence across Francophone West Africa.

Political Headwinds and Economic Risks

Still, the challenges are considerable. Ghana risks reputational damage by partnering with regimes under sanctions or embroiled in insurgencies. The macroeconomic divergence between Ghana and its Sahelian counterparts, particularly regarding inflation, debt, and fiscal governance, would complicate monetary coordination. ECOWAS, with Nigeria as its gravitational centre, may interpret any alternative bloc as a threat to regional cohesion, especially given the ongoing suspension of the Sahelian states from the organisation.

A full currency union, therefore, may be premature. But a phased approach—anchored in realism and adaptive diplomacy—could lay the groundwork for deeper integration.

Unorthodox Levers: Informal Cedi Adoption

One avenue worth exploring is the informal and market-led adoption of the cedi in cross-border trade and commercial activity. This approach would avoid the diplomatic sensitivities of a formal currency union, while gradually expanding the cedi’s regional footprint. Ghana could encourage this shift through several unorthodox but potentially effective measures:

First, Ghanaian institutions could facilitate the use of the cedi in key regional markets through bilateral agreements with major wholesalers and traders in the Sahel. By providing preferential terms for cedi-based transactions—such as access to lines of credit or discounts on Ghanaian exports—Ghana could incentivise organic demand for its currency.

Second, the Bank of Ghana could explore the deployment of mobile money and e-Cedi platforms that support cross-border trade settlements, particularly in commodities like livestock, grain, and shea butter, which flow naturally between Ghana and its northern neighbours. If properly regulated and interoperable, such platforms could create a digital ecosystem for informal but structured monetary convergence.

Third, Ghana could support the establishment of border-area trade facilitation zones where the cedi is the dominant currency of exchange. These zones—backed by infrastructure, customs integration, and financial services—could serve as experimental nodes for future monetary alignment.

The upside of these strategies is clear: gradual adoption avoids the immediate costs and political backlash of full-scale monetary union, while allowing Ghana to test and refine its institutional and technological readiness. It would also empower traders and firms to choose the most efficient medium of exchange, creating bottom-up momentum for regional integration.

However, risks must be acknowledged. Informalisation of currency use can lead to regulatory blind spots, raise concerns about capital flight, and complicate monetary policy transmission. Ghana would need to invest in financial oversight and anti-money laundering systems to mitigate these dangers. Moreover, success would depend on strong governance and consistent macroeconomic discipline—any erosion of confidence in the cedi could derail the experiment.

Toward a Phased, Pragmatic Integration

Rather than rush into monetary union, Ghana could champion a ThirdWay strategy: modular, market-driven integration rooted in trade, payments infrastructure, and shared economic interests. This would include piloting cedi-based trade settlements, investing in AfCFTA-compatible corridors, and scaling digital financial infrastructure for interoperability.

In time, as fiscal convergence and political alignment improve, this foundation could evolve into a more formal monetary framework. And in doing so, Ghana would offer not only an alternative to the CFA franc, but a model of regionalism anchored in consent, capacity, and mutual benefit.

Currency as Diplomacy

In an era where the boundaries of integration are being redefined, a cedi-centred currency bloc may appear improbable—but not impossible. What it demands is not naïve idealism, but strategic patience, bold diplomacy, and smart experimentation.

For Ghana, this would be more than an economic venture. It would be a statement of intent: that Pan-African cooperation is not the preserve of history, but the unfinished work of the present.

Towards a Legislative Framework for Agro-Processing and Agribusiness in Ghana

Ghana, often heralded as an agricultural economy, has long relied on agriculture for GDP contribution, employment generation, and export revenue. In 2023, the agricultural sector contributed approximately 19.57% to Ghana’s GDP, highlighting its continued importance. However, from 1950 to 2023, Ghana’s agricultural GDP growth in US Dollar terms has lagged significantly compared to Malaysia, a country with a similarly resource-driven economy in the mid-20th century. While Malaysia leveraged strategic legislation and policy to transition from raw material exports to agro-industrialisation, Ghana has neglected to establish a dedicated legislative framework to promote agro-processing and agribusiness. This glaring gap persists despite the transformative potential of value addition to agricultural products. This paper advocates for the development of such legislation, critically examines the existing legislative architecture, identifies its deficiencies, and explores pathways for progress by drawing on international best practices.

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A Historical Overview of Some Agricultural Legislation in Ghana

Since 1950, Ghana has enacted various laws addressing agriculture, with a predominant focus on production, land use, and resource conservation. However, the promotion of agro-processing and agribusiness has remained peripheral. Below is an analysis of key legislative instruments:

1. Farm Lands (Protection) Act, 1962 (Act 107):
• Mandate: Protect farmland for agricultural use and ensure sustainable practices.
• Core Elements: Regulation of land use to prevent conversion to non-agricultural purposes and fair acquisition processes.
2. Grains Development Authority Act, 1970 (Act 324):
• Mandate: Enhance grain production and storage.
• Core Elements: Establishment of the Grains Development Authority (GDA), with a focus on production techniques and infrastructure for storage and distribution.
3. Cocoa Board Act, 1984 (PNDC Law 81):
• Mandate: Oversee cocoa production, marketing, and export.
• Core Elements: Farmer support, research in cocoa cultivation, and export promotion. The Act minimally addresses domestic cocoa processing.
4. Environmental Protection Agency Act, 1994 (Act 490):
• Mandate: Regulate the sustainable use of natural resources, including agricultural land.
• Core Elements: Environmental impact assessments for agricultural projects and measures to prevent degradation.
5. Forestry Commission Act, 1999 (Act 571):
• Mandate: Manage forest resources, including timber for agro-industrial purposes.
• Core Elements: Conservation of forests, indirectly benefiting industries reliant on timber.
6. Internal Revenue Act, 2000 (Act 592):
• Mandate: Provide tax exemptions for key industries, including agriculture.
• Core Elements: Limited incentives for agro-processing despite broad support for agricultural production.
7. Fisheries Act, 2002 (Act 625):
• Mandate: Develop and regulate the fisheries sector.
• Core Elements: Sustainable fishing practices and aquaculture promotion, with minimal focus on fish processing.
8. Plants and Fertilizer Act, 2010 (Act 803):
• Mandate: Regulate fertilizers, seeds, and plant protection.
• Core Elements: Productivity enhancement through quality inputs.

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Interconnectedness and Overlaps in Legislation

The existing legislative framework reveals significant overlaps but limited integration. For instance, the Cocoa Board Act emphasises production and export, focusing on supporting farmers and ensuring Ghana’s competitive position in the global cocoa market. However, its objectives are not synchronised with policies that could incentivise domestic cocoa processing, such as tax breaks for processors or mandates for local value addition. Similarly, the Internal Revenue Act provides tax incentives for agricultural production broadly, but these are not harmonised with other laws to ensure a cohesive value chain that transitions smoothly from production to processing and distribution. Additionally, overlaps in mandates between the Forestry Commission Act and the Environmental Protection Agency Act, particularly regarding the sustainable use of resources, sometimes result in conflicting or redundant compliance requirements for agro-industrial projects. This lack of integration undermines the potential for a unified strategy to support agro-processing and agribusiness growth.

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The Persistent Focus on Production

Ghana’s agricultural policies have historically prioritised production due to:

1. The colonial emphasis on exporting raw materials.
2. Post-independence strategies for food self-sufficiency.
3. Structural Adjustment Programmes (SAPs) of the 1980s, emphasised liberalisation over industrialisation.

This production-centric approach has led to:

• Limited domestic value addition has had profound consequences for Ghana’s agricultural economy. Major industries such as cocoa processing, fish canning, grain milling, and fruit processing have struggled to scale due to the production-centric focus of existing legislation. For example, cocoa, Ghana’s flagship export crop, sees less than 20% processed locally, leaving the country dependent on the volatile prices of raw cocoa beans on the international market. Similarly, the fish processing industry remains underdeveloped, limiting the value derived from the nation’s abundant fisheries resources. The grain industry also faces significant gaps, with much of the maize and rice consumed domestically being imported due to inadequate local milling capacity.

This production-centric approach has created a twin impact: increased importation of processed foods, which undermines local industries, and the forfeiture of potential export revenue from value-added products. The dominance of raw material exports also limits Ghana’s ability to access premium international markets, which increasingly demand processed and certified agricultural goods. Addressing these gaps requires a deliberate shift towards legislation that integrates production with value-added processing and trade.

• Ghana’s agro-industrial development trajectory highlights significant missed opportunities for intensifying growth and sophistication. Despite its abundant natural resources, the country has struggled to develop robust agro-industrial capacity. Key opportunities have been missed in areas such as the establishment of large-scale cocoa processing plants, the development of modern fish processing facilities, and the expansion of grain milling operations.

For instance, while Ghana has remained a leading cocoa producer, the absence of infrastructure and incentives for local processing has left the country heavily reliant on raw bean exports. Similarly, inadequate investment in fisheries processing has limited the value derived from its rich marine resources. Furthermore, the lack of a cohesive strategy for agro-industrialisation has resulted in an overreliance on small-scale and cottage industries, which lack the scale and technology to meet both domestic and export market demands.

This failure to capitalise on agro-industrial opportunities has exacerbated Ghana’s dependence on imported processed goods, reduced its export competitiveness, and left critical gaps in the value chain. To reverse this trend, Ghana must prioritise investments in technology, infrastructure, and policy frameworks that facilitate agro-industrial sophistication.

• Ghana’s failure to tap into low-hanging fruits within the Economic Community of West African States (ECOWAS), the African Continental Free Trade Area (AfCFTA), and the global African diasporan markets reveals missed opportunities for export diversification and higher earnings.

Within ECOWAS, Ghana could dominate markets for processed cocoa products, shea butter, and processed fish, leveraging regional preferences and trade agreements. The AfCFTA offers a continental platform for Ghana to supply value-added agricultural goods such as packaged fruits, refined palm oil, and processed grains to a growing middle-class market seeking quality African-made products.

Globally, the African diaspora presents a significant opportunity for niche agro-processed goods, including traditional foods and beverages like gari, shito, and locally brewed palm wine, with strong emotional and cultural appeal. However, the absence of robust agro-processing legislation limits these products' scalability, quality, and marketability, leaving Ghana unable to meet demand effectively in these key markets.

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Economic Impacts of Legislative Gaps

The lack of agro-processing-focused legislation has significant repercussions:

• Low Industrialisation: The agro-processing sector remains underdeveloped, dominated by small-scale operations unable to scale effectively. This reflects a deeper structural failure to select and prioritise emerging opportunities as the foundation for the New Ghana economy. A successful strategy should aim at self-funding growth through entrepreneurial ventures that generate substantial, broad, and long-term economic benefits. However, the absence of a coherent national vision and the persistence of a culture tolerating mediocrity have stifled efforts to build a sophisticated agro-industrial sector. Additionally, a lack of focus on habits like disciplined work ethics, competitive advantage creation, and prioritisation of Made-in-Ghana products has perpetuated the challenges in scaling agro-processing industries. Without these fundamental shifts, Ghana’s agro-industrial ambitions remain aspirational at best.
• Revenue Losses: Exporting raw materials denies the economy the added value of processing. This issue stems from a long-standing false paradigm: the belief that producing and selling more basic products automatically equals development and wealth. While it seems logical that increased exports of raw materials would raise GDP, and thus provide more funds for infrastructure, education, and growth-supporting sectors, this approach has not led to sustainable development or resilient wealth in Ghana. The focus on raw material exports has often failed to translate into technological advancements, infrastructural investments, environmental sustainability, social equity, or political stability. This production-centric model is intuitive on a superficial level but falls apart under scrutiny, as it has exacerbated unsustainable development patterns.

Moreover, powerful actors, such as large corporations and politicians, have historically promoted this revenue-first paradigm due to vested interests in short-term gains. This has diverted attention and resources away from creating value through agro-processing and industrialisation. Addressing these structural flaws requires a deliberate shift towards policies and legislation that prioritise value addition, long-term sustainability, and equitable economic transformation.

• Employment Deficits: Opportunities for job creation across the value chain remain unrealised, with significant losses in employment potential due to the lack of integration between agriculture, agribusiness, and agro-processing industries. Global best practices demonstrate that integrating these sectors generates substantial employment across various levels. For instance, in countries like Brazil and Malaysia, robust agro-processing industries have created millions of direct and indirect jobs, ranging from raw material sourcing to processing, packaging, distribution, and export logistics.

In Ghana, the absence of a coordinated approach has left industries like cocoa processing, fisheries, and grain milling underdeveloped. For example, limited local processing of cocoa beans denies opportunities for factory jobs, marketing roles, and technical positions within advanced processing facilities. Similarly, the underinvestment in fish processing plants has curtailed employment opportunities in post-harvest handling and value addition. The resulting unemployment not only affects rural communities but also deprives urban centres of the industrial workforce needed for economic diversification. Addressing these gaps through targeted legislation could unlock tens of thousands of jobs across the agricultural value chain.

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International Best Practices for Agro-Processing Legislation

Countries with successful agro-industrial sectors offer valuable lessons:

1. India: The "National Food Processing Policy" encourages agro-industrial parks, tax incentives, and export-driven processing.
2. Brazil: Agro-industrial clusters thrive due to policies promoting credit access, technology adoption, and market linkages.
3. Malaysia: The "National Agro-Food Policy" integrates R&D, subsidies, and infrastructure for processing.

Ghana can adapt these models to develop a legislative framework that supports agro-processing and agribusiness development.

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Opportunities for Economic Transformation

A robust legislative framework would:

• Enhance Food Security: Current legislation and policy in Ghana provide opportunities to refocus on agro-processing to significantly reduce post-harvest losses and ensure stable food supplies. By prioritising investments in processing infrastructure, aligning environmental regulations with industrial goals, and offering incentives to agro-industrial ventures, Ghana can transform its agricultural outputs into diverse, market-ready products. This refocusing could involve expanding the mandates of existing frameworks like the Grains Development Authority Act and the Cocoa Board Act to actively promote processing and value addition while integrating robust strategies for food storage, preservation, and distribution. Such a coordinated effort would not only stabilise food availability but also bolster resilience against global supply chain disruptions, positioning Ghana as a model for food-secure economies.
• Boost Export Revenue: Processed goods fetch higher prices in international markets. For Ghana, opportunities for sustainable competitive advantage in agro-processing and agribusiness can be leveraged in industries such as cocoa-based products, shea butter, processed fruits like mangoes and pineapples, and fish processing. These sectors offer potential for premium export markets, particularly under trade agreements such as AfCFTA and ECOWAS, where regional demand for value-added goods is on the rise. Investing in these industries could transform Ghana’s export portfolio, increase foreign exchange earnings, and position the country as a leader in high-quality agro-processed goods.
• Leverage Regional Trade: The African Continental Free Trade Area (AfCFTA) offers a vast market for processed agricultural products. By harnessing this opportunity, Ghana can expand its agro-processing industries to supply value-added goods such as processed cocoa, shea butter, refined palm oil, and packaged tropical fruits. These products have strong appeal within Africa’s growing middle class and are well-suited to meet regional demands under AfCFTA. Integrating this effort with quality standards and robust supply chains will enhance competitiveness and ensure Ghana's processed goods become staples across the continent.

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Evolution of Agro-Processing Industries in Ghana

• Cottage Industries: Cottage industries in Ghana, such as gari processing, palm oil extraction, and traditional shea butter production, play a pivotal role in rural economies. These enterprises provide essential income for households and preserve local knowledge. However, their potential remains untapped due to inadequate access to modern technology, financing, and markets. Modernising these industries could significantly increase their productivity and integration into domestic and international value chains, creating more jobs and improving livelihoods across the country.
• Medium-Scale Enterprises: Cocoa grinding firms established in the 1980s exemplify limited industrialisation. However, food manufacturing firms like Premium Foods Limited and Niche Cocoa Industries are notable examples of businesses that source locally to produce value-added products for both domestic and export markets. Premium Foods Limited has evolved its business model around processing fortified blended foods, primarily cereal-based, for both local consumption and international humanitarian markets. Its partnerships with organisations like the World Food Programme have ensured steady demand and international exposure. Similarly, Niche Cocoa Industries has implemented a vertically integrated model, handling the entire cocoa value chain from bean sourcing to producing premium cocoa products for international markets. These firms have utilised innovative financial strategies, including partnerships and export financing, to scale operations and develop robust access to global markets.
• Large Corporates: Companies like Blue Skies and Nestlé have achieved export success by leveraging innovative business models and global access strategies. Blue Skies has adopted a model focused on delivering fresh-cut tropical fruits directly to European supermarkets, using Ghana as a processing hub for its proximity to raw materials. This approach ensures a strong connection between local farmers and international markets, supported by certifications that meet stringent global standards. Nestlé, on the other hand, has capitalised on its global brand presence to introduce value-added cocoa and coffee products sourced and partially processed in Ghana, integrating the country into its extensive global supply chain. Both companies demonstrate the importance of aligning production quality with international requirements and building efficient logistics networks to access premium global markets.

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Leveraging Existing Legislation

While existing laws do not explicitly promote agro-processing, they offer entry points:

1. Farm Lands (Protection) Act: Amend to explicitly allocate land for agro-industrial zones, incorporating provisions for infrastructure development, investor access, and sustainability measures to enhance and aggressively promote agro-processing and agribusiness in Ghana.
2. Grains Development Authority Act: Amend the GDA’s mandate to include a more robust focus on grain processing, including provisions for promoting grain milling, storage innovations, and the development of value-added grain-based products. Additionally, incentives could be introduced to attract private investment in grain processing facilities, while encouraging partnerships between local farmers and processing firms to ensure a consistent supply chain.
3. Cocoa Board Act: Amend to provide more robust incentives for local cocoa product manufacturing, such as tax holidays, subsidised energy for processing facilities, and grants for technology acquisition. Additionally, introduce mandates for a minimum percentage of local cocoa to be processed domestically before export, complemented by export incentives for value-added cocoa products.
4. Environmental Protection Agency Act: Streamline environmental approvals for agro-industrial projects. Amend the Act to establish expedited approval pathways specifically for agro-industrial projects that meet sustainability criteria. Introduce guidelines for environmentally friendly technologies in processing, and incentivise compliance through reduced fees and faster processing times. Additionally, require periodic reviews of environmental regulations to align with emerging agro-industrial trends and promote eco-friendly practices.
5. Forestry Commission Act: Amend to prioritise agro-industrialisation by expanding its mandate to include the promotion of timber-based agro-processing industries. This could involve providing incentives for establishing timber processing hubs, supporting research and development in sustainable timber product manufacturing, and integrating timber-based industries into national agro-industrial zones to enhance and aggressively promote agro-processing and agribusiness in Ghana.
6. Internal Revenue Act: Broaden tax reliefs for processors by introducing targeted incentives such as tax holidays, reduced corporate tax rates, and deductions for capital expenditures specifically for agro-processing businesses. Additionally, establish accelerated depreciation allowances for investments in processing equipment and infrastructure. Create a tiered incentive structure to encourage scaling from small to large-scale operations, and integrate these provisions with other agricultural laws to foster a cohesive agro-industrial ecosystem.
7. Fisheries Act: Amend to establish dedicated fish processing hubs with integrated cold storage and packaging facilities, supported by tax incentives and subsidies for small and medium-scale fish processors. Additionally, include provisions for capacity building, training in modern processing techniques, and facilitation of export market linkages to aggressively promote fish processing and contribute to Ghana's agro-processing ambitions.
8. Plants and Fertilizer Act: Support R&D for processed agricultural products by operationalising initiatives such as government-backed research grants targeting post-harvest technologies, establishing dedicated agro-research centres focused on processing innovations, and incentivising private sector investments through public-private partnerships. Funding mechanisms could include levies on agricultural exports, allocations from the national budget, and access to international development funds. Collaborative efforts with universities and international organisations could further enhance technical expertise and innovation in this field, ensuring the development of cutting-edge, market-driven solutions.

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Addressing Challenges for MSMEs and Corporates

Without enabling legislation, businesses face:

• High operational costs.
• Limited access to technology, finance, and infrastructure.
• Regulatory bottlenecks, that deter investment in agro-processing.

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Global Market Implications

The absence of dedicated agro-processing legislation restricts Ghana’s global market potential by:

• Undermining compliance with international standards.
• Reducing competitiveness in processed goods.
• Limiting access to premium markets for certified products.

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Recommendations for Legislative Development

1. Integrated Value Chains: Link production, processing, and export policies.
2. Infrastructure Development: Establish agro-industrial parks and logistics hubs.
3. Incentive Mechanisms: Provide tax breaks and grants for processors.
4. R&D and Training: Invest in innovation and capacity building.
5. Market Access Support: Facilitate entry into regional and global markets.

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Conclusion

The lack of agro-processing and agribusiness legislation in Ghana is a significant barrier to industrialisation and economic transformation. By developing a targeted legislative framework, Ghana can unlock the full potential of its agricultural sector, create jobs, diversify exports, and enhance its competitiveness. This shift would not only address historical shortcomings but also position Ghana as a global leader in value-added agriculture.

 

Enforcing the Single Obligor Rule to Commercial Bank Lending to the State and Public Sector in Ghana

 In the wake of Ghana’s debt default and the subsequent Debt Exchange Programme, applying the Single Obligor Rule (SOR) to total public sector lending—including Treasury Bills and Bonds—presents a critical opportunity for the nation’s financial landscape. This regulatory measure, which limits banks' exposure to a single borrower or connected entities, could mitigate systemic risks, foster a more robust private sector, and contribute to sustainable economic growth. Below, we explore this approach's rationale, benefits, and potential challenges.

 

Understanding the Single Obligor Rule

The SOR is designed to prevent excessive exposure to a single borrower, promoting diversification of loan portfolios and prudent lending practices. In Ghana, its application would limit total public sector borrowing to a specific percentage of a bank’s net worth, forcing financial institutions to explore opportunities beyond the government sector. This aligns with the broader goals of economic and financial stability and risk management.

 

Context: Ghana’s Debt Default and Exchange Programme

Ghana’s debt default led to a restructuring of approximately GHS137 billion in domestic notes and bonds under the Debt Exchange Programme. The programme’s objective was to restore debt sustainability and stabilize the economy. However, the high concentration of government debt in banks’ portfolios exposed the financial sector to significant risks, underscoring the need for stricter regulatory measures like the SOR.

 

The Case for Applying the Single Obligor Rule

1.       Risk Mitigation:

o   Excessive public sector borrowing creates vulnerabilities in the financial system. The SOR would compel banks to diversify their portfolios, reducing the risk of systemic failures arising from public sector financial distress.

 

2.       Reorientation of Banking Practices:

o   Banks would shift focus from the “easy gains” of government securities to supporting the real economy. This reorientation would unlock deposits for private-sector lending and foster a more dynamic and competitive banking environment.

 

3.       Private Sector Empowerment:

o   Limiting public sector borrowing would free up capital for private businesses, enabling them to access more credit. While interest rates may not immediately decrease, firms could work with banks to reduce risks and negotiate better terms, leading to long-term economic benefits.

 

4.       Fiscal Discipline:

o   Constraining government borrowing would pressure the state to increase revenue through direct taxes and efficient resource allocation. This could reduce reliance on debt and encourage sustainable fiscal policies.

 

Broader Economic Impacts

1.        For Banks:

o   The SOR would enhance risk management, diversify loan portfolios, and strengthen financial stability. Banks would need to improve their expertise in assessing and managing private sector loans, which aligns with their core mandates.

 

2.        For Private Firms:

o   Greater access to credit would support business expansion, job creation, and innovation. The competition among banks for private sector clients could lead to improved loan terms over time.

 

3.        For the Economy:

o   Diversifying lending away from the public sector reduces economic dependence on government performance, creating a more balanced and resilient economic structure.

 

Challenges and Considerations

1.       Implementation Hurdles:

o   Banks with significant holdings in government securities may face difficulties transitioning their portfolios. A phased approach to SOR enforcement could alleviate these challenges.

 

2.       Government Financing Needs:

o   Limiting public sector borrowing might constrain short-term fiscal operations. Therefore, it will be essential to explore alternative financing mechanisms, such as public-private partnerships and bond markets.

 

3.       Private Sector Risks:

o   For the private sector to benefit fully, businesses must address operational inefficiencies and improve risk management. Collaboration between banks and firms will be crucial.

 

Strengthening Ghana

Enforcing the Single Obligor Rule for total public sector lending is a pivotal step toward strengthening Ghana’s financial system and economy. While short-term adjustments may be challenging, the long-term benefits—including reduced systemic risks, a vibrant private sector, and balanced economic growth—outweigh the initial constraints. By fostering a culture of prudential banking and fiscal discipline, Ghana can lay the foundation for a more resilient and sustainable future.