The Bank of Ghana has assured that it is closely monitoring banks following the Domestic Debt Restructuring as liquidity pressure mounts.
This is to help reduce any pressure on their balance sheets and avert the possibility of insolvency.
Speaking on behalf of the Governor of the Bank of Ghana at the induction ceremony of the Ghana Association of Restructuring and Insolvency Advisors (GARIA), Head of Resolution Office, Elliot Amoako said macro prudential risk assessment of the banking sector indicates an emergence of spillover from the current economic challenges in the banking industry.
Mr. Amoako however appealed to the insolvency practitioners to support the regulator in making the financial sector stable.
“One can confidently say that strong supporting legal frameworks and policies have been established to respond expeditiously to the occurrence of any such events in the future. The other factor has to do with the challenging operating environment that triggers financial crisis for companies including banks and SDIs (Specialized Deposit-taking Institutions).
“Indeed, the Bank’s macro prudential risk assessment of the banking sector indicated the emergence of signs of spillovers from the current macroeconomic conditions, characterized by high inflation and rising interest rates to the banking sector. In particular, pressures on solvency and liquidity of banks have increased and the bank is closely monitoring these developments.”
Mr. Amoako
Prior to this revelation from the central bank’s desk, financial analysts predicted same outcomes to be realized from successful implementation of the Domestic Debt Exchange Programme (DDEP).
The Programme from the effected date as noted by Mr. Amoako, started having strong implications on the financial sector.
The central bank however promised to closely monitor this trend and provide prompt remedies to avert the extensive impact on the financial stability of the industry indicating that it has already started putting in place those tactic measures.
“Already, some regulatory relief measures have been lined up for banks to moderate the potential impact of the Domestic Debt Exchange Programme (DDEP) and ensure stability in the sector. These trends require close monitoring to avert insolvency in some institutions.”
Mr. Amoako
As a follow-up on the Domestic Debt Restructuring, talks are currently underway on how to restructure Ghana’s External Debt. This, according to government will help revive the economy and also help secure its $3 billion deal with the International Monetary Fund (IMF).
His Excellency Nana Addo Dankwa Akufo-Addo, President of the Republic of Ghana, during his address at the Annual Ambassadors and High Commissioners get-together at the Peduase Lodge on Tuesday, February 28, 2023 night, expressed confidence in Ghana reaching a final deal with the IMF for a bailout at the end of this month, March 2023.
Government in progressive talks with China about debt cancellation
President Akufo-Addo’s optimism hinges on progressive talks it is having with the Chinese authorities for debt cancellation despite various analysts thinking otherwise and still some others with thoughts of a possibility, saying it will take a longer process than the DDEP.
According to the President, a meeting with the Chinese Eximbank is progressing positively, giving indications the country could seal its deal with the Paris Club.
“We acknowledge the reality of the fact that our economy is in considerable difficulty. The Budget drawn for the 2022 fiscal year was thrown out of gear, disrupting our balance of payment and debt sustainability and further exposing the structural weaknesses of our economy.
“We have gone to the IMF to repair in the short term, our public finances and restore our balance of payments while we continue to work on the medium to long term structural changes that are at the heart of our goal of constructing a resilient and robust Ghanaian economy and building a Ghana beyond aid.”
Akufo-Addo
Akufo-Addo is confident that with the cooperation from the Paris Club and the People’s Republic of China, which has sent a delegation from China’s Eximbank to Accra over the weekend to meet with the officials of the Ministry of Finance, Ghana will be able to go to the board of the Fund for a final agreement on the deal by the end of March.
“Just as we managed to achieve a staff-level agreement with the Fund in record time, December last year, whose terms we are systematically fulfilling, including the difficult and ultimately highly successful progress of the DDEP, this will set the stage to the strong recovery of Ghana’s economy.
“Needless to say we would hope that all Ghana’s friends will weigh-in with words of support at the Fund.”
Akufo-Addo
