A Deputy Finance Minister, Charles Adu Boahen, has insisted that the long-term benefits of the government doling out close to GHc10 billion to rescue depositors funds following the collapse of seven local banks outweigh the current cost.
Mr. Adu Boahen said protecting deposits was the government’s priority.
He however assured that persons responsible for the banking crisis will be held accountable.
“I think we are better off with it and I can assure that you will see the prosecutions, and you will see the people being brought to book,” Mr. Adu Boahen said on the Citi Breakfast Show.
“We had 1.2 million depositors that we had to make sure were whole. Can you imagine if we hadn’t stepped in and today we had 1.2 million depositors whose savings, hard-earned monies would just have been wiped out because of gross mismanagement and corporate governance abuses of the owners and shareholders and managers of these banks.”
In a 12 month period, the Bank of Ghana revoked the licenses of seven local banks in a bid to sanitize the financial sector.
The affected banks were UT and Capital Bank; both of which have been taken over by the state-owned GCB Bank, Beige Bank, Sovereign Bank, Construction Bank, uniBank, and Royal Bank; all of which have been merged to form the Consolidated Bank, Ghana.
Protecting the depositors has so far cost the state GHc 9.9 billion, according to the Finance Minister, who presented the 2019 Budget statement and policy document.
“Rescuing the situation regarding these seven banks has so far cost some GHc 9.9 billion in monies that Government had not budgeted for, and could have surely been put in good use to fix our numerous infrastructural needs, such as housing, roads, bridges, etc,” Ken Ofori-Atta said during the budget statement.
Ghana’s debt stock hits 70% of GDP
Ghana’s debt stock has increased from GHS 142 billion in 2017, to GHS 170bn in 2018, constituting 70% of the country’s GDP.
“Mr. Speaker, the nominal public debt stock as at end September 2018 was GH¢170.8 billion, comprising external and domestic debt of GH¢86.6 billion and GH¢84.1 billion, respectively. The overall rate of debt accumulation in 2018 is 19.8 percent, driven primarily by the cost of the clean-up of the financial sector, involving resolution of the seven (7) defunct banks.
Cleaning up microfinance sector; 80% of DKM arrears settled – Ofori-Atta
The government has also paid substantial amounts owed persons who lost their investments to Diamond Microfinance Limited (DKM), Finance under the previous administration.
The Finance Minister revealed said about 80 percent of funds owed DKM customers had already been settled.
Mr. Ofori-Atta indicated that government had set aside funds at the Bank of Ghana to pay the remaining 20 percent of the arrears upon validation.
“An additional 12,612 claims have been fully provided for, but the customers have not as yet been able to show proof of deposit. This means that 92 percent of DKM claims from depositors have been paid or provided for. Depositors for the remaining 7,568 claims of above GH¢10,000 are yet to reach agreement with the liquidators,” he stated.
Thousands of customers of DKM Microfinance Company lost their investments running into millions of cedis after the central bank in 2015 suspended the operations of DKM for violating the Banking Act.