Vice President Dr. Mahamudu Bawumia has said his caution that some banks were on the verge of collapsing, as far back as 2015, was supported by data from the International Monetary Fund (IMF).
According to Dr. Bawumia, an Asset Quality Review of the country’s banking system – a study occasioned by the IMF – showed that “the financial system was very weak” while pointing out that seven to eight banks were in danger of collapsing.
He said his prediction, which was ‘rejected’, was later corroborated by former President John Mahama, in his State of the Nation address when he alluded to the fact that the financial system was not being supervised well. He said this development, among others, led to the collapse of about 82 microfinance companies at the end of the previous administration’s tenure of office.
Dr. Bawumia, who was speaking in a radio interview in Kumasi, attributed the cause to poor supervision and bad corporate governance. He explained that the depositors of those MFIs were not supported in any way, while the Bank of Ghana (BoG), at the time, had given liquidity support to some of those institutions – which was committed to other purposes contrary to what it was meant for.
He said the legal processes are still being followed to hold people accountable as efforts to resolve some others progress – like the issue of venture capital. He noted that while some of the processes have delayed the Akufo-Addo led government, there is commitment to ensuring that no depositor – about 4.6 million of MFIs and banks – loses money.
The Vice President said data available suggest a significant number of the depositors have been paid, leaving about 3,918 – costing the country about GH¢21billion “which was not budgeted for”. He said the president’s commitment to equal treatment ensured that every depositor was catered for.
He explained that those who have not yet been paid have certain legal issues which the Receiver is working to resolve, but assured that, certainly, everyone will be paid.
Arresting the dollar
Dr. Bawumia, who has been on a four-day visit in the Ashanti Region inaugurating and cutting the sod for projects, further explained that there are two different regimes of exchange rates – fixed and flexible. He said in the context of the flexible exchange rate regime operated by the country, it is practically impossible to maintain the rate since its flexible nature causes it to appreciate and depreciate depending on the economic fundamentals.
However, he said: “Arresting the depreciation means that you are reducing the rate at which it is moving”. He said for 2017 to 2019, the average exchange rate depreciation was 8 percent; while for 2013 to 2016, the average exchange rate depreciation was about 18 percent under the previous government.
“This year, 2020, despite being an election year and also with impacts from the outbreak of COVID-19, so far the exchange rate depreciation stands at 2 percent.”
He attributed this to confidence in the economy by investors and also some policies introduced by the Bank of Ghana (BoG), like the forward market into the exchange rate management regime. This enables the BoG to know ahead of time the quantum of foreign exchange needed by investors, which has helped to eliminate shocks and brought stability into the system.
Digitisation of the economy
Also touching on the subject of digitisation, the Vice President said Ghana is one of the leading countries in Africa driving the digitisation agenda. He said the country has made significant progress to close four years of the current administration.
For instance, he revealed that about 15.5 million people have been enrolled on the National Identification Card System, capturing those from 15 years and above. He said this is major for digitization of the country. He said Ghana remains the only country in Africa to have pursued the ‘National Digital Property Address System’, also capturing over 4 million into the data system so far.
Additionally, he said, government also rolled out the mobile money interoperability system linking bank accounts to mobile wallets and making it possible to transact business anywhere. While mentioning the similar progress of digitisation undertaken in the National Health Insurance System (NHIS), he disclosed that the ‘Ghana Card’ will soon be approved by the National Health Insurance Authority (NHIA).