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BAWUMIA FLAYS MAHAMA OVER NPP’S FINANCIAL SECTOR REFORMS

Politics

Just as he has begun scouting for a fitting aide and running mate who could be a “Bawumia Beater”, John Dramani Mahama has made the mistake of straying into the murky waters of controversy by blaming the recent banking and financial sector crisis on the governing NPP government.

Just as he has begun scouting for a fitting aide and running mate who could be a “Bawumia Beater”, John Dramani Mahama has made the mistake of straying into the murky waters of controversy by blaming the recent banking and financial sector crisis on the governing NPP government.

 

Apparently angered by what he sees as political hypocrisy, Vice-President Mahamudu Bawumia went to town yesterday, skinning the former President and flagbearer of the National Democratic Congress to the bone. And he chose no other platform than the launch of an affordable housing project at Amasaman in Accra to zap poor John.

Fuming

An irate Dr Bawumia said that instead of explaining to the good people of Ghana how his government “superintended over outright regulatory failure and cronyism which led to the biggest financial crisis ever in Ghana, the former President chose, as is characteristic of him, to rewrite history”.

In his view, Ibrahim Mahama, a brother of the former President, is one of the biggest culprits in the banking crisis.

Treating Mr Mahama to an incisive lecture, Dr Bawumia recounted how the previous NPP government, under the leadership of President J A Kufuor, put in place significant reforms between 2001 and 2008 to create a modern financial sector.

NPP reforms

The reforms, he added, included developing the bond market, which started with the Government of Ghana issuing an index-linked bond (GGILB) in 2001 as well as major innovations under the Financial Sector Strategic Plan (FINSSP: 2004-2008). Among the changes were the establishment of the Central Securities Depository in 2008, to provide more protection for investors in government and corporate securities.

The Vice-President said the NPP government also initiated the overhaul of the exchange control and liberalisation of the foreign exchange regime. That allowed for free foreign investment and liberalisation of foreign trade. And the enactment of the Credit Reporting Act to introduce a credit bureau system has helped to provide more credit to actors previously excluded from the market.

Further interventions

The Vice-President said among other reforms introduced by the Kufuor-led NPP government, the Borrowers and Lenders Act 2008 (Act 773) created a collateral registry to help creditors give more loans on a secure basis.

In addition to these reforms, he said, the Kufuor government established the Ghana Venture Capital Trust Fund to promote equity funding for small and medium-scale enterprises, and introduced the pension reforms which have led to the viable private pensions industry of today, providing pools of long-term finance for the economy and offering workers enhanced long-term financial security.

The Bank of Ghana also established the Ghana Interbank Payment and Settlements System (GhiPPS) to strengthen the payment infrastructure and lay the foundation for innovative financial services to drive inclusion.

NDC destroys gains

However, Dr Bawumia said, Ghanaians had watched painfully as the gains from these far-reaching reforms implemented under the Kufuor government “were eroded by years of no regulatory and supervisory oversight under John Mahama’s NDC administration”.

This failure led to the “licensing of institutions with fake capital, poor corporate governance and impunity as shareholders plundered the deposits of poor depositors”, the Vice-President argued.

“It is these years of poor regulation without supervision that saw the mushrooming of licensed institutions who had no intention from the very beginning to engage in responsible banking or other deposit-taking business,” he lamented.

Former President Mahama claims that the problems in the banking sector could have been handled differently.

“During the world financial crisis, it was not uncommon that many countries, because of the strategic nature of their domestic financial institutions, provided bailouts in exchange for equity in order to prevent a chaotic meltdown of the sector,” he said last week.

But according to the Vice-President, “John Mahama shows off his limited understanding of this issue with these claims, forgetting that almost all the NPLs [non-performing loans] transferred to NPART [Non-Performing Assets Recovery Trust] in the 1990s were from five or so state-owned banks, with NPLs from the only three private banks constituting a mere 14 per cent.”

NDC closed several banks

He said Mahama also failed to mention that it was the same NDC government which deemed it wise to close banks after the NPART had shown that it was not a panacea for dealing with the banking sector crisis.

That decision led to the liquidation of the Bank of Credit and Commercial International (BCCI) in 1999, and the closure and liquidation of the Co-operative Bank and Bank for Housing and Construction in 2000.

He also slammed the suggestion by Mr Mahama that the Bank of Ghana should have continued to dole out public funds to enrich bank shareholders had plundered the assets of their banks funded with depositors’ funds.

Dr Bawumia further queried if he expected the government to nationalise all the failed financial institutions at the expense of the tax payer.

Security threat

Responding to Mr Mahama’s claim that the government’s intervention constitutes a threat to national security, Dr Bawumia queried his refusal to employ nurses and teachers by putting the blame on the World Bank.

He concluded that Mr Mahama and his NDC have nothing useful to offer the Ghanaian people and should apologise to them for causing their pain in the first place.