The Financial and Insurance sub-sector of Ghana falls under the services sector of the economy. The services sector, as per the 2019 budget statement, saw a decline in its share of the Gross Domestic Product from 56.2% to 45.6% after the rebasing exercise. Notwithstanding the effects of rebasing, the financial and insurance subsector itself witnessed a decline in its contribution to the Services sector by 17.7% in 2017.
The Finance Minister in the 2019 budget statement also disclosed that the challenges in the banking sector which resulted in the closure of some banks had cost the Ghanaian tax payer about GHC 9.9 billion so far. Not to say the Ghanaian tax payer will be bearing the brunt alone as information obtained from the Central bank indicates that banks operating in the Country wrote off a total of GHC 1.1 billion as bad debts between January and October 2018. It is an undisputed fact that one cannot isolate the impact of the banking crisis on the performance of the services sector and the economy as a whole.
This however brings to the fore the analogy of the chicken before the egg or vice versa? Statistics from the bank of Ghana indicate that the private sector alone accounted for 95.5% of the banking industry’s Non-Performing Loans (NPL) as at October 2018. So was the poor performance of the banks leading to their reduction in number partly as a result of a seemingly tough economy or the reverse?
Notable downsides to the economy as a result of the reduction in banks operating in the country are the obvious job loses both direct and indirect. These will certainly go a long way to impacted Ghana’s already high unemployment rate which per the International Labour Organization was pegged at 2.4% in 2017.The Ghana government is justifiably concerned that the economy will not be able to absorb these job losses. To be continued…