Coordinate with Government, Central Banks Told

Accra, Aug.6, GNA - President John Agyekum Kufuor on Monday called for a symbiotic relationship between the central bank and government in order to sustain macroeconomic stability and rapid growth.

Addressing the opening session of a two-day international symposium to mark the 50th anniversary celebrations of the Bank of Ghana, President Kufuor was of the opinion that central banks do not have to operate in isolation with regard to the imperatives of the society. He explained that, asking central banks to cooperate with government did not suggest in anyway that, they should be subservient in discharging their responsibilities

"What I am saying is that central banks should be partners but, yes, they must be independent too and part of the economic and social leadership."

The symposium is under the theme: Central Banking and the Millennium Development Goals and is meant to examine central bank practices and the impact they have had on society and the way forward. President Kufuor noted that central banks have a social responsibility, and need to ensure coordination between fiscal and monetary policies and consultation with government. "Central Banks have a role in promoting the development of the domestic capital market to ensure that micro, small and medium enterprises have access to financial services," he added. He noted; ".creating a market for capital for this segment of our society is the sure way to generate employment and incomes for the bulk of the population in a developing economy like ours and fighting poverty at its core."

He said government over the last few years has created a comprehensive legal and regulatory framework for the development of an effective financial services sector and with this in lace the Bank of Ghana (BoG) could set the pace for modernization of banking and the financial system of the economy.

President Kufuor challenged the BoG to assume leadership role in building a globally integrated financial services industry and a financial centre; one that promoted financial inclusion of the poor as a basis for rapid growth.

He said a sustained macroeconomic stability was without doubt key to attain the poverty reduction targets under the MDG's and central banks had a role to play and work in tandem with government in promoting the growth agenda to ensure prosperity for all the people. The President said economic growth still remained government's single most important factor influencing poverty, adding that, since 2002, real GDP has risen from an average of 5.5 per cent, hitting 6.2 per cent last year.

"Our aim is to achieve 8.0 per cent over the medium, having contained inflation and trapping interest rates down from high levels keeping the cedi stable against foreign partners."

Mr. Kwadwo Baah-Wiredu, Minister of Finance and Economic Planning said government focus was to grow the economy in a pro-poor manner at a rate that would ensure that; "we achieve not only the dream of reaching a middle income country status by 2015, but also, satisfy as much as possible the MDG's over the same period."

He said Ghana, going at the current pace, has been acknowledged to halve poverty, within two years, ahead of the 2015 target. "To realize the above dream, government is scaling up its resources to embark on infrastructural development in energy, transport, water, ICT, health, education and agriculture," Mr. Baah-Wiredu stressed, noting that, "the success so far could not have been achieved without the supportive and complementary policies pursued by the Bank of Ghana." He mentioned the Ministry of Finance and Economic Planning and the bank as having contributed immensely in managing Ghana's economic and financial policies culminating in enhanced revenue generation, greater control of government expenditures, freeing resources for poverty-related expenditures through debt relief initiatives under the HIPC Initiative and the MDRI, as well as cost recovery, especially in the petroleum sector.

The Finance Minister said the Bank was collaborating with the Ministry in a Capital Market Committee with membership drawn from two institutions to ensure that only value-for-money investment projects and programmes were pursued to meet the accelerated growth agenda of the country.

Mr. Baah-Wiredu admitted that the task of transforming socio-economic lives was daunting and definitely needed sustained collaboration between the central bank and the Ministry to ensure that policies were pursued to help achieve objectives outlined in GPRS2. Dr. Paul Acquah, Governor of the BoG said the Bank has chosen an inflation-targeting regime, having emerged from a period of strong fiscal dominance and armed with statutory operational independence under the bank of Ghana Act (2002).

He said the central bank was the nerve centre of the national financial system, and its policies and prudent supervision were critically important to maintaining price stability and sound efficient payment and settlements infrastructure as well as financial stability, which are essential for growth.

"These conditions are the best that central banking can provide to the society as a public good," he added.

Mr J. H. Mensah, Chairman of the National Development Planning Commission, who chaired the symposium, condemned the staff and management's position of the Agricultural Development Bank on the proposed divestiture of 48 per cent of Bank of Ghana shares, arguing that the situation that led to the collapse of Ghana Airways, the former national airline would not be allowed to occur. "If the Bank of Ghana thinks selling its shares, it can go ahead." 06 Aug. 07