The Bank of Ghana (BoG) has disclosed that the banking sector remained stable, sound, liquid and profitable, even as banks continue to adjust to the impact of the Domestic Debt Exchange Programme (DDEP).
This was disclosed by the governor of the BoG, Dr. Ernest Addison, during the 115th Monetary Policy Committee (MPC) meeting last week.
According to him, the sector’s capital adequacy levels remained above the minimum regulatory level with regulatory reliefs, with most banks carrying excess liquidity.
This is an improvement compared to 2022 financial statements where most banks in Ghana recorded losses, which was met with concern and speculation about the future of these banks in the coming years.
One factor that has been identified as a major contributor to these losses was the Domestic Debt Exchange Programme (DDEP), which has impacted negatively on their profitability position.
The DDEP was introduced in 2022 by the government of Ghana as a way to manage the country’s domestic debt. Under the program, holders of government securities were given the option to exchange their bonds for longer-term bonds with marginal interest rates. This move was aimed at reducing the government’s debt servicing costs and improving its debt sustainability.
Mr. Addison continued that the industry’s Non-Performing loans ratio increased to 18.3 percent in October 2023, from 14.0 percent in October 2022 – and 15.7 percent in January 2023 – reflecting elevated credit risk associated with the lagged effects of the macro-economic crisis of 2022.
“Profitability continues to improve as banks continue to invest in high yielding short-dated BOG and GOG instruments. The banking sector showed some resilience as the various stress tests on banks’ capital, following adverse macroeconomic shocks, pointed to stability”, he added.
The Governor, who also doubles as the chairman for the committee, further said developments on the international commodity market show that prices of Ghana’s major export commodities recorded gains relative to price conditions at the beginning of the year.
This, he said, since January 2023, crude oil prices have registered a 9.1 percent increase to US$88.7 per barrel in October 2023 driven in large part by concerns about global supply shortfalls arising mainly from the extension of production cuts from Saudi Arabia and Russia.
Also, “Cocoa prices have risen sharply to levels last seen in the 1970’s to US$3,603.3 per tonne in October 2023. The 41.9 percent increase in cocoa prices is mainly attributed to mounting concerns over tight supplies in Ivory Coast and Ghana stemming from adverse weather conditions.
“Gold prices gained 6.6 percent to settle at US$1,913.79 per fine ounce largely due to expectations of a pause in the U.S. Federal Reserve rate hikes and demand for the commodity on account of its safe-haven status amid heightening geopolitical tensions”, he stated.
Moreover, he indicated that there was further improvement in the trade balance over the first ten months of the year, partly reflecting the generally favorable commodity prices alongside import compression.
The trade account, he said, indicated a higher surplus of US$2.1 billion for the first ten months of 2023, relative to a trade surplus of US$1.8 billion in the same period of 2022 and was driven by a greater reduction in imports relative to exports.
He explained that the total imports declined by 8.9 percent to US$11.4 billion, driven by both non-oil imports and oil and gas imports, “ Non-oil imports were estimated at US$7.7 billion, down by 9.3 percent, while oil and gas imports also declined by 8.1 percent to US$3.7 billion. Merchandise exports also declined by 6.4 percent to US$13.4 billion and this was weighed down by crude oil exports and cocoa products”.
“Of the total, gold export earnings increased by 13.9 percent to US$6.1 billion benefiting from both volume and prices increases. Cocoa beans exports also increased by 6.1 percent to US$1.1 billion on the back of higher volumes.
“In contrast, crude oil exports decreased sharply by 33.5 percent to US$3.1 billion mainly driven by reduced volumes, while ‘Other’ exports, including non-traditional exports, decreased marginally by 1.1 percent to an estimated value of US$2.6 billion”, the governor said.
