Ghana’s efforts to restructure its local-currency and overseas debt have led to losses for two of the country’s top banks. GCB Bank Plc and Standard Chartered Bank Ghana Ltd. both reported net losses for the year to end-December. Ghanaian banks have taken a hit of around $1.4 billion as the country restructures most of its public debt, which is estimated at 576 billion cedis. As a result, Guaranty Trust Holding Co., Nigeria’s largest bank by market value, has vowed to slow lending and bond trading in Ghana.
GCB Bank, the country’s largest lender by assets, posted a net loss of 593.4 million cedis, its first since 1993. Standard Chartered Bank Ghana reported a loss of 297.8 million cedis. The impairments were caused by Ghana’s restructuring of its public debt, which was a consequence of spending pressures from an energy crisis between 2013 and 2015, a banking-sector cleanup in 2018, shocks from the Covid-19 pandemic, and Russia’s invasion of Ukraine.
Ghana exchanged 87.8 billion cedis of local notes that paid an average of 19%, with bonds returning as little as 8.35%, resulting in losses for financial institutions. President Nana Akufo-Addo’s government is in discussions with international debt holders as it seeks to finalize a $3 billion bailout from the International Monetary Fund. The IMF is pushing Ghana to bring its debt down to 55% of GDP by 2028, from a projection of 109% before the government’s interventions.
The losses incurred by Ghanaian banks due to the country’s restructuring of its public debt are likely to have long-term effects on their operations. For the most part, the restructuring has resulted in losses for banks in the country, with GCB Bank and Standard Chartered Bank Ghana posting net losses for the first time in decades.
As a result, Guaranty Trust Holding Co. has pledged to slow its lending and bond trading activities in Ghana. The country’s debt has risen due to a range of factors, including an energy crisis and banking sector cleanup, and the IMF is pushing for it to be reduced to 55% of GDP by 2028. The government’s interventions have resulted in losses for financial institutions, highlighting the risks associated with debt restructuring.
Source: Adom online.