The Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has emphasized the success of the three-year financial sector reforms (2017-2019) that led to the closure of several domestic banks, including unibank, UT, Capital, Beige Bank, and Heritage Bank.
The comprehensive exercise involved raising the minimum capital requirement for banks, revoking licenses of insolvent institutions, and revamping regulatory and supervisory frameworks.
Dr. Addison highlighted that as a result, the sector became better capitalized, more liquid, profitable, resilient, and operationally efficient, with sufficient capital buffers.
While acknowledging the difficulty and pain associated with the closure of defunct banks, Dr. Addison noted that the measures, supported by the government’s assumption of payments due to depositors, prevented the total collapse of the banking sector and, by extension, the entire financial sector.
Speaking at the Chartered Institute of Bankers 2023 Governor’s Day in Accra, Dr. Addison emphasized that the full benefits of the clean-up exercise would be realized with the expedited completion of legal proceedings, including over 1,300 civil and 21 criminal cases currently pending in various courts.
Addressing the recent economic challenges, Dr. Addison underscored the country’s strong economic fundamentals, stable financial sector, and advanced payment system architecture. Despite facing an unprecedented global shock in 2020 due to the pandemic, he commended the government’s swift response and clear public policy initiatives that effectively managed the consequences.
To finance pandemic-related expenses, the Bank of Ghana, the IMF (through the Rapid Credit Facility), and the World Bank intervened.
Dr. Addison highlighted the successful purchase of GHS10 billion of the Government’s Covid-19 bonds by the Bank of Ghana, which bridged the exceptional financing gap and helped contain the pandemic’s effects.
However, he pointed out that the fiscal cost associated with pandemic containment, coupled with spillovers from the Russia-Ukraine war in 2022, led to widened sovereign spreads on Ghana bonds and downgrades by Credit Rating Agencies.
This situation hindered Ghana’s access to international capital markets, causing the country to miss planned external borrowing of about US$3 billion.
Dr. Addison highlighted the importance of external borrowing to manage debt liabilities, including energy-related payment obligations, as Ghana faced annual external debt service payments and energy payments ranging from 3 to 4 billion US dollars annually as of 2020.