Finance Minister Ken Ofori Atta says government has spent a total amount of GH¢21.6 billion (5.6 per cent of GDP) to save the country’s ailing financial sector which it inherited from the previous National Democratic Congress’ (NDC) administration.
The sector minister who made this known yesterday in Parliament, was presenting the 2020 Mid-Year Budget Review.
“As at the end of first quarter 2020, a total amount of GH¢13.6 billion (3.5 per cent of GDP) has been spent on the resolution of failed banks, Specialised Deposit-taking Institutions (SDIs), Micro Finance Institutions (MFIs), the establishment of the Consolidated Bank Ghana Limited (CBG), as well as the capitalization of the Ghana Amalgamated Trust (GAT).
“Mr. Speaker, additionally, with the President’s directives to fully pay all depositors, whose funds were locked up with the failed SDIs and MFIs, an amount of GH¢5 billion was spent.
“This brings the total expenditure on financial sector interventions as at June 2020 to GH¢18.6 billion (4.8 per cent of GDP),” he noted.
The Finance Minister added that government also committed an amount of GH¢3.1 billion (0.78 per cent of GDP) towards supporting investors in failed asset management companies regulated by the Securities and Exchange Commission (SEC).
“The timely intervention under this administration resulted in the saving of these locked up funds in failed banks. This was a sobering but necessary action that in total was costing the state in excess of GH¢21 billion of taxpayers’ funds. These are funds that could have been otherwise deployed to support the development agenda of the government,” he emphasised.
Banking Sector Clean-Up
He continued that as a result of mismanagement, depositors’ funds were locked up with no hope that these depositors could access their own funds.
“The authorities, with foresight and appreciation of the role of the banking/financial sector to any economy, especially to oil the engine of the private sector, introduced painful but unavoidable reforms to clean up the mess inherited from the previous government.
Mr Ofori-Atta added that the Bank of Ghana had stepped up to the challenge and announced various policy measures to help support the economy and financial institutions in order to cushion the adverse impact of Covid-19 on the economy, adding that this has been possible due to the responsible and competent management of both the fiscal and monetary space since 2017.
Justification for Clean-Up
“Let it be said that a serious government as we are, desperate as we were, to fix a broken economy as it was and fund our own programmes, as promised, and as patriotic as we are, we had absolutely no thoughts, no time, no energy or the luxury to conspire with the central bank to deliberately cause the downfall of Ghanaian banks that were already in zombie state, fatally insolvent, by the time we took office.
“What we did was to merge those that had failed, save those that could be saved, with the view to building a strong and viable financial sector with integrity. What the President did, which is unusual in banking practice, globally, was to go the extra mile to save the funds of all depositors of failed banks. Let no one stand on the staple and proclaim untruths and let mature Ghanaians be quick to listen, slow to speak and slow to anger—James 2:10,” the Minister highlighted.
Source: Modern Ghana