The Bank of Ghana has disclosed in its 2024 Financial Stability Review that Phase 2 of the Domestic Debt Exchange Programme (DDEP) had a relatively low impact on the audited financial performance of banks in 2023.
This outcome is attributed to lower levels of holdings and improved restructuring terms. Additionally, some impairments had already been accounted for by banks in 2022, and they generally reported a strong rebound in financial performance in 2023.
The report highlighted that the Government of Ghana negotiated and restructured bond holdings of pension funds amounting to GHS30.01 billion in August 2023. Looking ahead, the report indicated that external debt restructuring, particularly concerning Eurobonds, could lead to further impairments for banks and other participating financial institutions.
To address potential impacts from the government’s debt operations, the report noted that regulatory relief measures implemented by financial sector regulators, the execution of recapitalisation plans, and the establishment of the Ghana Financial Stability Fund will help mitigate risks in the financial sector.
Furthermore, the Financial Sector Strengthening Strategy (FSSS), developed in 2023, aims to coordinate regulatory interventions to swiftly identify and address risks to the financial system.
On a positive note, the report emphasized that domestic debt restructuring has created some fiscal space for the government and contributed to a reduction in the debt-to-Gross Domestic Product ratio. The second phase of the DDEP was launched on July 14, 2023, involving the restructuring of Cocoa Bills (GH¢8.1 billion) and locally issued US dollar-denominated bonds ($808.99 million).