Professor Isaac Boadi, the Dean of Accounting and Finance at the University for Professional Studies (UPSA), Accra, says the banking sector of the national economy has started bouncing back, after the domestic debt exchange program (DDEP).
“A year after the DDEP, we can say that the banking sector is resilient. Growth in the sector has picked up and they are getting back to normalcy.
“The balance sheet of the banks is strong as they have been able to increase their assets. The financial soundness of the banks are positive and all these give one indication; the sector is growing and getting stronger”, he stated, whilst speaking to Atinka TV.
According to him, the DDEP program was unavoidable but despite its impact, it has, at the same time, yielded the anticipated fruits as return on equity has gone up drastically high. It has also moved from negative to positive growth.
Somewhere in 2022, Ken Ofori-Atta, the then Finance Minister, announced that government would undertake a debt operation programme.
Under the Programme, domestic bondholders would be asked to exchange their instruments for new ones. Existing domestic bonds, as of December 1, 2022 would be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.
The annual coupon on all of these new bonds was set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. Coupon payments would be semi-annual.3
Government’s commitment to Ghanaians and the investor community, in line with negotiations with the IMF, was to restore macroeconomic stability in the shortest possible time and enable investors to realize the benefits of the Debt Exchange.
In line with that, Treasury Bills were completely exempted and all holders would be paid the full value of their investments on maturity. There would be NO haircut on the principal of bonds, amongst others.
The Government recognised that financial institutions held a substantial proportion of these bonds. As such, the potential impact of the exchange on the financial sector had been assessed by their respective regulators.
Appropriate measures and safeguards were instituted to minimise the potential impact on the financial sector and to ensure that financial stability was preserved.
A year after the program, according to Professor Isaac Boadi, the numbers show that the banking sector is resilient.
