Finance Minister Ken Ofori-Atta has promised that the domestic financial industry will be protected during discussions at IMF negotiations while discussions on a sustainable debt path for the country are ongoing.
Given that a sustainable debt path is still essential for any IMF program, the Ghana Team, the World Bank, and the International Monetary Fund (IMF) are currently working on a debt sustainability analysis (DSA) to inform the program negotiations.
To sustain its development plans, the nation needs a strong domestic financial system, according to Mr. Ofori-Atta, particularly in the three years ahead with limited access to the international capital market.
“Therefore, everything must and will be done to protect our financial sector; and there must be room for a win-win conversation through extensive stakeholder engagement with both our domestic and external investors.
“Ghana has always had a collaborative approach with its partners, and we shall, I am confident, come out with a ‘historic arrangement’.
“The sanctity and well-functioning of the financial system is sacrosanct, and we need the support and trust of all Ghanaians to deliver this,” he said.
In view of this, a 5-member committee consisting of financial services professionals across the banking, asset management, pensions and insurance sectors is being formed to engage key stakeholders in the financial services sector.
“An announcement of the Committee Members will be made in the coming days, and they will immediately get to work to engage key stakeholders in the financial services sector – in addition to ongoing engagements with Civil Society Organisations (CSOs), social partners (labour unions, employers and FBOs), academia, industry professionals and the leadership of Parliament,” the minister mentioned.
He assured that government will ensure a comprehensive package is negotiated with the aim of restoring and sustaining macroeconomic stability, ensuring durable and inclusive growth and promoting social protection.
Debt restructuring concerns
Bankers have expressed concern about how an imminent debt restructuring will impact the asset structure, earnings and operations of banks.
The sector has entreated managers of the economy to be circumspect in their decision-making, so as not to destabilise the budding financial sector and erode recent gains made… especially as pertains to investor confidence.
According to budget figures, Ghana spent GH¢20.5billion (US$2billion) in first-half of the year paying its debts – or 68 percent of its tax earnings. By the end of June, the total amount owed by government had risen to GH¢393.4billion, or 78.3 percent of GDP.
In response, Ghana started a proposed three-year enhanced domestic programme engagement with the IMF in July for US$3billion – joining a number of emerging markets that are being forced to default or restructure some of their debts this year.
This was done after efforts to stop the sell-off of its Eurobonds and halt a record depreciation of the cedi currency against the dollar – including cutting discretionary state spending by as much as 30 percent – failed.
With the expectation of a tough business environment in the near-term, banks are reviewing existing operations and investment strategies to ensure sustainable performance as they remain risk-aware and undertake effective credit management processes.