The amount is equivalent to 1.6% of the Gross Domestic Product (GDP) of the country.
The revelation was captured in the World Bank’s ‘fourth Ghana Economic Update report’.
The report stated that “the government will have to spend at least GH¢5.5 billion of taxpayers money this year to address the challenges in the MFIs, S&Ls sectors, as well as the Heritage and Premium banks that were collapsed and added to the Consolidated Bank Ghana Ltd.”
The banking sector clean up, alone, cost the economy close to GH¢13 billion. Another GH¢900 million according to the Bank of Ghana has been given by the government to begin the clean up exercise in MFIs sector.
This means that, close to GH¢20 billion is likely to be spent on the entire financial sector reform exercise by the end of this year.
The World Bank, however, has thrown its weight behind the reform exercise, calling it urgent.
“Reducing financial sector vulnerability is urgent and will require additional efforts in 2019, and over the medium term. In total, in 2019, the government will have to spend an additional GH¢5.5 billion (equivalent to 1.6% of GDP) to solve all challenges related to the MFIs, Savings and Loans, and the introduction of another resolution bond for the CBG to support the closure of two additional banks that took place in January 2019,” the World Bank report said.
The report further noted that many Specialised Deposit-taking Institutions (SDIs) are not operating in a safe and sound manner and are in violation of prudential norms.
“Not all the SDIs are currently active because they have either stopped reporting or have folded. Others are financially distressed, facing liquidity and/or solvency challenges,” the report added.
Recently, the Country Director of the World Bank, Henry Kerali urged the Bank of Ghana (BoG) to be tough on regulation and exercise its oversight responsibility strictly in order to prevent any future recurrence of revoking licences of some financial institutions in the country.
He said, “In terms of mitigating these things from happening in future, there is the need for stronger regulations and oversight for the MFIs and all deposit-taking institutions. They must come under stronger regulation and oversight. There need to be some mechanisms that will allow the central bank to exercise its oversight role without necessarily increasing its size.”