The Minister of Finance, Mr Ken Ofori-Atta has disclosed that the financial sector cleanup which led to the collapse of some insolvent financial institutions is costing the taxpayer GH¢21 billion.
According to the Minister, the clean-up was necessary because of mismanagement at these financial institutions which led to depositors’ funds being locked up with no hope of such funds ever being accessed funds.
He said 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 is 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,” the Minister said when he addressed Parliament today.
“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, 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 angry-James 2:10”.
Providing a breakdown of how the GH¢21 billion was spent, Mr Ofori-Atta stated that “as at the end of first quarter 2020, a total amount of GH¢13.6 billion (3.5percent 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 capitalisation of the Ghana Amalgamated Trust (GAT)”.
Additionally, Mr Ofori-Atta said an amount of GH¢5 billion was spent on the the President’s directives to fully pay all depositors whose funds were locked up with the failed SDIs and MFIs,
“This brings the total expenditure on financial sector interventions as at June 2020 to GH¢18.6 billion (4.8 percent of GDP). Government has also committed an amount of GH¢3.1 billion (0.78 percent of GDP) towards supporting investors in failed asset management companies regulated by the Securities and Exchange Commission (SEC).
“Mr. Speaker, this would bring the overall total Government expenditure for the failed financial institutions to GH¢21.60 billion (5.6 percent of GDP). A legacy of financial enslavement from the previous administration”.