The President of the Republic, Nana Addo Dankwa Akufo-Addo, has revealed that a road-map for addressing the weaknesses in the banking sector is being implemented.
According to President Akufo-Addo, the need to entrench reputation and credibility in the financial system is crucial, explaining that a weak banking system undermines growth.
On this basis, the President stressed that the current weaknesses in the country’s banking sector need to be addressed forcefully to minimize any adverse financial consequences to unsuspecting savers, and their spill-over effects on the economy.
“My understanding is that a road-map for addressing banking sector weaknesses is being implemented. I urge you, as the nation’s central bank, to remain committed to the process and to address the challenges confronting the banking sector. This will not only guarantee financial stability, but also promote greater confidence in that sector”, he said.
The President continued, “Your most recent measures, in intervening decisively over the matters of UT Bank and Capital Bank, demonstrate your preparedness to act in a manner worthy of a responsible central bank, of a praiseworthy regulator. I am confident that you have the support of the nation.”
President Akufo-Addo made this known on Friday, 18th August, 2017, when he delivered a speech at the 60th anniversary celebration of the Bank, at an event held at the Kempinski Hotel, in Accra.
Government’s Supportive Role
Touching on the maintenance of stability, a role not reserved for the Bank of Ghana only, President Akufo-Addo indicated that his government also has a role to play.
“We are committed to the path of fiscal consolidation. We must do this so that the Bank of Ghana can concentrate on what it was set up to do. Persistent and excessive fiscal deficits get in the way of the Bank’s core mandate,” he said.
To this end, the President noted that his government is committing by statute to ensure that the overall government fiscal deficit remains within a reasonable band of between 3-5 percent, beginning in 2018.
President Akufo-Addo revealed that his government is also working hard to find a solution to the huge energy sector-related debt exposures that threaten the stability of the country’s banking system.
“To offset the legacy debts in the energy sector, government will shortly issue a $2.5 billion energy bond. It will provide much needed liquidity to the banking sector, and also create space for increased investment in the sector by improving the balance sheets of companies such as VRA, GRIDCO and ECG. The bond will be collateralised with proceeds from the Energy Sector Levy,” he said.
Government, the President assured, will continue to pursue vigorously policies that would complement the Bank’s effort of bringing down the cost of borrowing for the benefit of households, and especially of micro, small and medium-scale enterprises, who provide most of the jobs.
“Government will, thus, continue to improve the supply of electricity in a bid to reduce the risks inherent in the economy, and lower the risk premium that feeds into cost of funds,” he added.
President Akufo-Addo reiterated his call for stronger partnership, as well as greater degree of policy coordination, between the Bank of Ghana and the Ministry of Finance, urging the Bank of Ghana also, within its remit of operational independence, to play a pivotal role in formulating and implementing policies that will enable the economic transformation of our nation that we all desire.