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Business News Wed, 3 Dec 1997

Central Bank To Shift Policy Finance Productive Sector

Accra (Greater Accra) 2 Dec. '97 The Bank of Ghana said today it is fine-tuning its monetary policy to shift focus from deficit financing to financing the productive private sector. Dr.. Kwabena Duffour, Governor of the Bank, said in Accra today that "this will reduce to the barest minimum the excess liquidity in the economy with the view to containing the rate of inflation in the economy". In a speech read for him at the opening of a five-day regional seminar on housing finance schemes in Africa, the governor said the bank will establish a housing sector development fund to support mortgage financing.

The seminar is being attended by participants from 12 countries including the united States, France, Malaysia, India and Kenya. They will share housing development experiences from their home countries.

Dr.. Duffour said for the country to benefit fully from mortgage financing, the relevant financial infrastructure in respect of specialised development banks, development finance institutions, guarantee schemes and ancillary financial services need to be developed and strengthened. "These are institutions that can mobilise resources, including foreign resources, to support the operations of mortgage finance institutions". But Dr.. Duffour cautioned that unless the macro-economic environment improves, it would be difficult to transform the propositions into reality.

"We still have inflation to contend with and the instability in the foreign exchange market is certainly a drawback in our efforts to establish a strong base for long-term financing. Dr.. Duffour said in spite of the difficulties, the bank recognises the relevance of housing financing in its programme to broaden the financial infrastructure.

The governor noted that factors such as inflation, exchange and interest rates as well as the level of aggregate purchasing power are crucial in the efficient performance of a mortgage finance system. " We also realise that commercial banks, being largely short-term financial institutions, have always been reluctant to provide for mortgage finance.

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"Thus, the financial development policy of the bank now favours the establishment of development finance institutions to give support to housing finance companies in the country".

Dr.. Duffour urged the participants to study the options available on the issue of mortgage financing and fashion out policies that can propel the housing industry into the 21st century.

Dr.. Isaac K. Adjei-Mensah (NDC, Techiman North), Minister of Works and Housing, referred to the inadequate supply of housing in Ghana which he attributed to lack of support from the financial institutions and the harsh macro-economic environment. He said government's housing policy is to facilitate the private sector to increase housing stock through a number of measures like access to land, development infrastructure, access to finance and tax holidays , among others. The Minister said in spite of the partnership between the home finance company, SSNIT and the Ghana Real Estate Developers Association, a large number of workers are not covered under the mortgage scheme because of their low incomes.

"Therefore effective strategies and mechanism must be identified to promote the development of more rental units to address this sector of the population," Mr. Adjei-Mensah said. The seminar, which is being organised by the HFC in collaboration with the Ghana Stock Exchange will feature topics such as strategies for housing finance, mobilising and allocating funds for housing finance and what have Africa housing policies wrought. gri

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