Government has the power to redirect credit towards key sectors like agriculture and small businesses by using the right policy tools, according to economist and senior lecturer at the University of Ghana Business School, Professor Lord Mensah.
Speaking in a recent X Space discussion hosted by NorvanReports and the Economic Governance Platform, Prof. Mensah noted that while private banks may hesitate to extend credit due to rising non-performing loans (NPLs), government can still influence the flow of funds into critical sectors.
“You don’t expect banks to immediately turn to businesses when NPLs have been rising over the years because of how the economy is structured,” he explained. “But if the government, through its policies, wants funds to flow into sectors like agriculture, it can make that happen.”
Prof. Mensah highlighted how targeted government policies—such as credit guarantees, interest rate subsidies, and direct incentives, can encourage banks to lend more to underfunded sectors with high potential. “Government has a way of channeling the funds through the banks, and then we end up at the doorstep of a typical agribusiness operator,” he added.
He also discussed how the current monetary and fiscal strategies are a “short-term strategic response” to recent liquidity challenges, including the rejection of multiple Treasury bill offers and the removal of certain levies. These measures, he said, are expected to inject liquidity into the economy, but to ensure lasting impact, this liquidity must be directed into sectors that will create jobs and promote economic resilience.
Ultimately, Prof. Mensah stressed that the government’s role isn’t just about stabilizing the economy, but enabling inclusive growth. “We’re all focusing on a point where we’ll realize growth that spurs employment and production,” he stated.
