Ghana to spend additional US$937m to refund deposits held at failed lenders

President Nana Akufo-Addo said the government will spend GH¢5 billion ($937 million) to refund money that was locked up when the country closed down scores of second-tier lenders and micro-credit companies last year.

That’s an increase from GH¢2.4 billion previously pledged for these lenders and in addition to GH¢13 billion that was mainly issued through bonds to support the clients of nine first-tier banks that were liquidated in a sweeping cleanup of the industry.

The total cost of the overhaul now exceeds GH¢20 billion after the government also contributed GH¢800 million toward the recapitalization of some lenders and another GH¢1.5 billion for investors in failed fund management companies.

The cleanup that started in 2017 followed years of poor governance and weak regulatory oversight that risked the savings of GH¢4.6 million depositors.

While the bailouts helped to stabilize the industry, it also added to Ghana’s debt that the International Monetary Fund estimated rose to 63% of gross domestic product by the end of 2019, from 59% the year before.

“I hope the lessons have been learned and this will serve as healthy caution to those who are offering unrealistic interest rates on deposits,” Akufo-Addo told lawmakers Thursday in the capital, Accra. “I do not think it will be possible to repeat this grand cleanup in another lifetime.”

The country will head to the polls in December