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More banks risk collapse over high power cost – Economist

Aug. 24, 2017, 2:05 p.m.

Ghana’s financial sector should brace itself for more banks collapse should the high cost of power continue unresolved.

This is the assertion of Economist, Dr. Charles Ackah.

Dr. Ackah who is also a Senior Research Fellow at the Institute of Statistical, Social and Economic Research (ISSER) argues that the high cost of power in Ghana has increased the cost of doing business which has made it difficult for industries to expand and repay loans taken from banks.

He made the remarks when he spoke to Citi Business News at the launch of a new research on the impact of the power crisis on Small and Medium Enterprises.

“Seeing that two banks have already folded up and eight others still struggling to cope means that if we do not do something about our energy, firms are going to be uncompetitive, they’re not going to be able to pay off the loans that they take from banks and we are going to have more collapse of banks and the systematic and multiplier effect will be very huge,” he asserted.

The comment by the Economist comes weeks after the collapse of two banks; UT and Capital Banks due to their high insolvency.

The huge energy sector debt has adversely affected the balance sheets of commercial banks in the country.

Aside this, businesses are also saddled with the high cost of power which has affected their cost of operations and their ability to repay loans.

The cost of power in Ghana measures relatively expensive compared to others within the sub-region.

Dr. Charles Ackah maintained that government must embark on a pragmatic effort to reduce the cost of power to keep businesses afloat.

“We are paying more for energy than what China or India is paying so it means the cost of doing business in Ghana is expensive and if you add unto the interest rates that these firms would have to borrow. Already our analysis has shown that the collapse of some banks can be linked to the dumsor because the banks are suffering from Non-Performing Loans.”

“These firms who have folded up and are struggling, had borrowed from the banks to be able to do business and because of the power crisis, many of them were unable to pay hence collapsed.”