Ghana Banking Cleanup Cost Risks Surging to $3.5 Billion

(Bloomberg) -- The cost of Ghana’s financial sector cleanup risks escalating to 20 billion cedis ($3.5 billion) as the government weighs increasing the guaranteed payback for some depositors, Finance Minister Ken Ofori-Atta said.

The West African nation has approved funding of about 16.4 billion cedis since 2017 to help recapitalize the industry and safeguard depositors’ funds after the central bank revoked the licenses of nine insolvent lenders and 23 second-tier institutions. The Bank of Ghana previously guaranteed 100% of funds deposited at banks, but only as much as 20,000 cedis per person for the customers of failed second-tier lenders, known as savings and loans companies.

The government has requested the central bank and finance ministry to also consider a full guarantee for deposits locked up at failed second-tier lenders, Ofori-Atta said by phone.

The ministry will “see if we can find some room to pay a little bit more,” he said.

The cleanup of the finance sector followed years of poor governance and weak regulatory oversight that risked the savings of 4.6 million depositors. While the bailouts helped to stabilize the industry, it also added to Ghana’s debt that was estimated to have risen to 63% of gross domestic product by the end of 2019, from 59% the year before. The country will head to the polls in December.

On Tuesday, President Nana Akufo-Addo pledged that those responsible for the crisis will face justice. On the same day, the former chief executive officers of two defunct banks appeared in court on counts of stealing and money laundering.

To contact the reporter on this story: Ekow Dontoh in Accra at edontoh@bloomberg.net

To contact the editors responsible for this story: Andre Janse van Vuuren at ajansevanvuu@bloomberg.net, Rene Vollgraaff

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