Establishment of GIRSAL has potential to contain rising inflation – Elsie Addo Awadzi

Government launches GIRSAL to augment agriculture sector

Food inflation hits 30.1% in May 2022 – GSS

Inability to address food supply conditions could impact BoG’s mandate of price stability

Second Deputy Governor of the Bank of Ghana, Elsie Addo Awadzi, has said the establishment of the Ghana Incentive-Based Risk Sharing System for Agricultural Lending (GIRSAL) has the potential to contain soaring inflation.

GIRSAL was designed to be a holistic and integrated system of instruments aimed at de-risking the agricultural sector and incentivize banks to lend to sector in order to drive agribusiness development and reduce capital constraints that limit competitiveness.

Delivering remarks at the launch of the Agriculture Stakeholder Convening and Advocacy Platform, Mrs Addo Awadzi said the initiative is pivotal to the country’s agriculture sector which can play a crucial role in price stability due to the weight of food in the consumer price basket.

She further highlighted that the gradual rise in food prices in recent months calls for a holistic and integrated system of instruments aimed at de-risking the agricultural sector.

“Since May 2021, the inflation data have pointed to gradual increase in food prices and this trend has intensified in recent months on the back of the recent Russian-Ukraine crises. Food inflation now stands at 30.1 percent in May 2022, significantly up from 5.4 percent in May 2021.”

“Indeed, further insights in the data reveals faster acceleration of food inflation, relative to non-food inflation. Thus, the inability to address food supply conditions could in the long run jeopardize the Bank’s mandate of price stability. It is within this context that I find this platform useful,” Mrs Addo Awadzi explained.

In recognizing the important role of the agric sector, the second deputy governor said the Bank of Ghana has been instrumental in the initiation, design and establishment of GIRSAL.

“Clearly, there are issues that underscore the fact that promotion of a resilient and thriving agricultural and agribusiness sector should not be taken for granted because of its broader implications on the economy, including price stability and helping to stabilize our currency through reduced food imports and generation of export revenues from the sector,” she added.

The second deputy governor further assured that the central bank will continue in its support for GIRSAL’s activities.

“We expect that through the AG Platform, GIRSAL would continue to drive the policy discourse and develop innovative solutions to boost productivity and growth in the agricultural sector. This should ultimately improve food supply conditions and help lower inflation. We are confident in the operations of GIRSAL and its long-term viability and we wish GIRSAL well in the years ahead,” she concluded.

Through joint efforts and support of technical partners such as the Alliance for a Green Revolution in Africa (AGRA), GIRSAL was to establish a Credit Guarantee (CRG) scheme to leverage lending for agriculture and agribusiness through a risk-sharing scheme.

MA/FNOQ