The Bank of Ghana is trying to strengthen the financial sector amid the global crisis

Ghana’s financial system appears to have survived the global credit crunch without much damage, largely because the system is relatively isolated from the international credit markets. But the country’s top economic managers are in disagreement about the policies pursued by former President John Kufuor’s administration between 2001 and 2009.


New prudential rules introduced by the Bank of Ghana (BoG), which was granted independence after the New Patriotic Party (NPP) came to power in 2001, require banks with majority foreign ownership to increase their minimum stated capital to C60m ($41.3m) by the end of this year. Locally-owned banks, five of which are listed on the Ghana Stock Exchange, have until the end of the year to raise their capital bases to C25m, and then to the full C60m by the end of 2012. If local banks are slow to raise funds, they are likely to be left behind when financing contracts for the oil and gas sectors are drawn up in the next couple of years.


Giving credit


“One thing the NPP should be given credit for is that they established a climate favourable to foreign direct investment,” says Kwame Pianim, an economist and chairman of New World Renaissance Investments. “Unlike Nigeria, where the banks got into trouble by lending to their customers to buy shares on the stock exchange, which eventually crashed, the Bank of Ghana has been careful not to allow the same mistake to happen here.”


But Ghanaian economists are in disagreement about the wisdom of some of the BoG’s more liberal policies. Finance minister Kwabena Duffuor, who was succeeded as governor of the central bank in 2001 by Paul Acquah, says the NPP administration should take most of the blame for the weakening of the cedi. Duffuor claims that although the BoG used $918m to prop up the currency last year, it nevertheless depreciated by 25.3% against the US dollar. 


Against this view, Databank CEO Ken Ofori-Atta says the impact of the global financial crisis has been muted because of BoG’s “firm and prudent supervision of the financial industry”.