Financial sector reforms: BoG cautioned against printing new notes to compensate depositors

Director of the Institute of Statistical, Social and Economic Research (ISSER), Prof Peter Quartey, has kicked against a proposal that government should print more notes to compensate persons affected by the collapse of some financial institutions.

In his view, heeding to a proposal by renowned economist, Kwame Pianim that government should consider permitting the central bank to print money to settle depositors will only lead to grave consequences on the country’s budget deficit.

According to Prof Quartey, although he agrees that customers must be paid back their funds, the mode of financing to settle victims of the dysfunctional banks must be planned critically adding that printing money is not an option.

“How we finance that is very critical. I don’t think printing more money is an option. Printing money will be inflationary and that can even lead to higher budget deficit beyond the 5 percent threshold that we have.”

He recommended that the BoG devise alternative means to pay depositors since government has spent several millions of Ghana cedis for the clean-up which included paying some customers.

“So yes we can find money to pay but not through printing money, that is not productive, that will rather be inflationary,” he said.

Over a period of two years, the financial sector experienced a shake-up after several indigenous banks and over 20 micro and saving and loan companies had their license revoked by the central bank. The financial institutions were deemed insolvent.

Meanwhile, President Akufo-Addo said government has set aside some GH¢16 billion to refund, in full, funds of the 4.6 million depositors affected.

According to him, the Finance Ministry and the Central Bank are working together to disburse the funds.