In a recent engagement, President Nana Addo appealed to financial institutions nationwide to enhance lending to the private sector. The President made this call during the Breakfast Meeting on Agriculture and Agribusiness Financing in Accra, on Monday, October 16.

I acknowledge the President's calls to banks to invest in the private sector. However, there might be a disconnect between the President's aspirations and the economic realities shaped by his administration. A closer examination reveals that the challenges banks face in meeting these expectations stem from the president's and his government's policies. Examples;

1. Banking Cleanup and Government Intervention: One notable instance is the banking cleanup in 2017, where the government allocated substantial funds to address issues within the banking industry. The government used over $3 billion to clean the banking industry and collapsed a sector that needed less than $1 billion to survive. The approach adopted by the government led to the collapse of banks that could have been sustained with a more strategic allocation of resources. This decision significantly contributed to the ongoing banking crisis in the country.
2. Negative Impact of DDEP Program: Additionally, the introduction of the DDEP programme in 2022 resulted in significant losses for several banks, impairing their ability to provide credit facilities. According to Bloomberg News, GCB Bank Plc, the country’s largest lender by assets, incurred a net loss of 593.4 million cedis ($50.5 million) for the year ending December 2022, marking its first loss since 1993. Standard Chartered Bank Ghana Ltd., the largest by market value, reported a loss of 297.8 million cedis by the end of December 2022. Calbank and CBG Bank suffered losses of 1.08 billion cedis and 2 billion cedis, respectively. Additionally, several other banks experienced losses by the end of December 2022, including the Central Bank of Ghana (BOG), which recorded a 60.81 billion cedis loss. This raises concerns about how banks incurring such significant losses can provide credit facilities to the private sector to stimulate business growth.
3. Unfulfilled Financial Stability Fund Promise: Despite government promises to establish a $1.5 billion Ghana Financial Stability Fund by the end of July 2023, the government has yet to fulfill this commitment. Even with the World Bank's $250 million loan assurance, the delay in raising the $1.5 billion funds has further undermined the financial stability of banks operating in the country.
4. Monetary Policy Rate and Lending Costs: The consistent increase in the Monetary Policy Rate by the Bank of Ghana, from 25.5% at the end of 2016 to 30% by August 2023, has resulted in higher lending costs. Calls from myself and other Economists and Bankers for the BOG to reduce the policy rate have been ignored, making it difficult for banks to offer affordable loans to businesses.

Given these circumstances, President Nana Addo and his government must reassess their approach. A recalibration of policies and a genuine commitment to supporting financial institutions are imperative. Only by establishing a realistic and supportive framework can these banks be empowered to provide the needed financial support to the private sector, fostering economic growth and development. The President, therefore, must address these fundamental issues before expecting distressed banks to perform wild magic and miracles.