A finance expert with the think tank Centre for Social Justice (CSJ), Haruna Alhassan, has said the central bank under the next government would have to review the minimum capital requirement for banks upwards to boost the strength of the country's financial sector.

Delivering a keynote address during the 13th Leadership Dialogue Series on the theme, "Ghana’s Economy from 2025 – 2028: The Hard Choices", Alhassan said the debt exchange and the depreciating currency have cut banks' capital in a way that makes them unable to finance critical projects at a reasonable cost.

"There are currently banks with minimum capital that really cannot finance impact-making projects on their own and sometimes even when they come together," the Fellow of the CSJ Finance Pillar said.

The Bank of Ghana recapitalised banks to a minimum of GH¢400 million between 2018 and 2019. At the time, the GH¢400 million was equivalent to $100 million.

However, in current terms, due to the cedi depreciation, GH¢400 million is less than $40 million. Haruna Alhassan said the almost 60% loss in capital for banks represents significant capital erosion for Ghana's banking sector.

"For banks to be able to have that same strength as we envisaged in 2018 and 2019, we would need to look at raising the minimum capital requirements," he stated.

He added that because some banks will struggle when a new minimum capital requirement regime is introduced, the Bank of Ghana must not introduce a "one-fit-all" capital requirement.

The Leadership Dialogue Series event, where Haruna Alhassan spoke, is the flagship civic education platform of the CSJ, a left-of-centre policy think. The annual event aims to nurture mass political participation and patriotic values through stimulating discussions with experts and prominent national leaders.

In his insightful address during the virtual event, Alhassan also urged the BoG under the next government to restrict Ghana's foreign exchange reserves to essential commodities or essential imports to mitigate the rapid depreciation of the cedi.

The Ghana cedi has been on what some analysts say is a record-breaking weakening cycle for a while now, worsening since last year. The Cedi depreciated 14% against the dollar by May 2024.
Triggered partly by foreign exchange (forex) supply shortfalls, the local currency, which was trading in January at GH¢11.97 to a dollar on the inter-bank market and at GH¢12.33 in the retail market, was selling at GH¢15.66 to $1 on the retail market by July 11, 2024.

"I don't see why we should be spending so much hard cash importing artificial and human hair when we need that money to import machinery…this is a situation where we don't have enough money, we don't have enough FX," Alhassan said.

Before Haruna Alhassan delivered his keynote address at the virtual event streamed live on Facebook, YouTube, and Zoom, Georgina Danso, a businesswoman in Ghana, discussed how businesses have been navigating challenges such as high inflation, triggered partly by the depreciating cedi.

Danso said the current economic situation has caused the business community in Ghana to lose hope and thus admonished the next government to inspire and restore hope to the private sector.
"Not just with impressive oratory tossed around… we are talking about a government that will actually take action," she reiterated.

The current administration led by President Nana Akufo-Addo since 2019 has been troubled by unprecedented high levels of inflation, worsened by a fast-depreciating local currency and a sluggish economy.

While an ultra-high appetite for borrowing, corruption, poor economic decisions and mismanagement have been blamed for the current situation, the government cites the Russia-Ukraine war and Covid-19 in its defence. However, many independent analysts disagree with this excuse.