Ghana's Growing Debt Pile Seen as Only Cure for Bad Banks

Ghana is borrowing its way out of a banking crisis. The government of West Africa’s second-biggest economy --- its budget already stretched by interest costs that consume about a third of its revenue -- is piling on debt to cover the liabilities of failed lenders and settle arrears dating back 20 years, Bloomberg News reported. It was left with little choice but to issue bonds to save an industry the International Monetary Fund sees as a financial-stability threat. “If you don’t intervene then you breed systemic risk,” George Bodo, a Nairobi-based banking analyst at Ecobank Capital Ltd., said by phone. “These banks hold deposits. The central bank and the government have to do whatever it takes to protect the public.” The country’s central bank is seeking to bolster the sector by revoking the licenses of poorly governed companies and implementing stricter guidelines on capital buffers. Read more.
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