Adnan Adams Mohammed
The Finance Minister has reported that the government had spent GH¢30.3 billion on the financial sector clean-up exercise as at the end of 2024.
This is not inclusive of the outstanding bailout for investors of the defunct Asset Management Companies (AMCs). However the financial sector is still struggling.
Of the GH¢30.3 billion, GH¢26.9 billion was spent on the banks, Savings & Loans companies, Financial Houses, Micro-Finance Institutions, and Asset Management companies. The rest of the cost, GH¢3.3 billion, was spent on the Ghana Asset Trust initiative, National Investment Bank, and Consolidated Bank Ghana.
“Mr. Speaker, despite this huge financial sector clean-up cost, the impact has been negligible”, Dr Casiel Ato Forson told parliament last week when presenting the 2025 budget.
“The National Investment Bank’s (NIB) situation is dire, posing significant fiscal risk to the economy as emphasized in the published 4th Review document of the IMF-supported Programme. Under the IMF-supported Programme, the NIB is to achieve a positive Capital Adequacy Ratio (CAR) by March 2025 after capital injection and be fully capitalized by December 2025.
“NIB’s capital gap as at Dec 2023 was GH¢2.3 billion of which the government’s recapitalization to date is GH¢1.6 billion”, the minister lamented..
Government, by the end of December 2020, completed the bailout exercise for depositors of banks and specialized deposits-taking institutions which had their licenses revoked.
Meanwhile, following the Domestic Debt Exchange Programme (DDEP) in 2022 and its impact on the balance sheet of the financial sector, government established the Ghana Financial Stability Fund (GFSF) to help mitigate the impact of the debt operation on the financial sector through the provision of solvency and liquidity support for the sector.
The estimated resource envelope for the Fund was about GH¢22.8 billion (US$1.5 billion) under the IMF-supported Programme.
At the end of December 2024, an amount of GH¢5.7 billion in the form of recapitalization bonds were released to operationalize the solvency window (Fund A2) of the GFSF, targeting mainly state-owned and indigenously owned financial institutions.
Dr Ato Forson in his presentation revealed that “a total of GH¢5.47 billion has so far been approved and disbursed to eleven financial institutions, including four banks, four capital market operators and three insurers.”
The Fund’s A2 segment is governed by a 9-member Investment Committee (IC), chaired by the Ministry of Finance. The Fund A2 is earmarked for impact assessment on beneficiary institutions.
The Fund’s A1 segment which is a US$250 million loan facility from the World Bank, is designed to further support the solvency window for all Banks and Specialized Deposit-taking Institutions. This Fund is yet to receive parliamentary approval.
Out of the total amount of GH¢ 8.55 billion earmarked under Fund A1 and Fund A2 of the GFSF to support relevant financial sector institutions, 64% (GH¢5.49 billion) had been utilized as at end of Dec 2024.
The Fund A1, made up of World Bank support of GH¢2.85 billion is not yet operational. This means that 96.3% of the Fund A2 (GH¢ 5.7 billion) has been utilized.
Of the total committed allocations of GH¢3.8 billion for addressing legacy issues in the financial sector, an amount of GH¢1.4 billion, representing 36.8% has been utilized for NIB’s recapitalization and Asset Management Companies (AMCs).
