Some banks to collapse should Gov’t fail to establish GHs 15bn Financial Stability Fund by Q3 2023

Ghana is facing a looming banking crisis unless the government can secure the GHS 15 billion Stability Fund by July 2023, warns Dr. Sa-ad Iddrisu, an economist at Louisiana Economic Development in the USA.

If the government fails to secure the necessary funds, banks will begin to collapse, unable to pay their employees and sustain their operations, resulting in job losses and a reduction in the number of branches.

Some banks in the country are already recording huge losses, and the lack of liquidity support from the Stability Fund will leave them with no choice but to fold up.

Ghana has been struggling with an unstable banking sector for some time now, with non-performing loans and bad debts being the primary contributors to the crisis.

The COVID-19 pandemic and the recent domestic debt exchange programme further exacerbated the situation, leading to a decline revenues. The government has been implementing various measures to stabilize the sector, including the establishment of the Ghana Stability Fund managed by the Bank of Ghana, and the development of unique operational guidelines by the Financial Stability Council.

The World Bank has committed $250 million to the fund, which is due to be paid in the third quarter of 2023. Talks are also underway with donor partners, such as the African Development Bank, to secure further resources for the fund. However, Dr. Iddrisu warns that the government needs to speed up the process of mobilizing funds to cushion the banks from the impending crisis.

In response to the situation, banking consultant Dr. Richmond Atuahene suggests that the government should engage mining and telecom firms to help mobilize revenue to mitigate the imminent danger. He believes that these sectors could be a cash cow, and their involvement would be vital to saving the banking sector from collapse.

The Ghanaian banking sector is crucial to the country’s economy, and a crisis in the sector could have significant ramifications for the wider economy and the region. The government must act quickly to secure the necessary funds and implement policies to stabilize the sector, including a reduction in non-performing loans and the provision of liquidity support to banks. Failure to do so could lead to further economic challenges and a deeper crisis in the future.

Source: norvanreports