Fitch predicts growth in Ghana's banking sector

Ratings agency Fitch has forecasted a turnaround in Ghana’s banking sector once the local economy stabilises from its current challenges.

It cited recovery from compounding debts, an improved business environment, and other positive indicators as factors likely to drive economic growth.

Fitch noted that Ghanaian banks recorded profits in 2023 and 2024, attributing the significant windfall to high yields on treasury bills.

According to the ratings agency, this growth has helped rebuild the capital base of local banks, which had suffered significant losses due to the controversial Domestic Debt Exchange Programme (DDEP) in the last quarter of 2022.

Fitch further stated that the recovery of banks will position these financial institutions to meet regulatory capital requirements once temporary relief measures expire.

"A more stable economic environment, characterised by stronger GDP growth, declining inflation, and a stabilized exchange rate, is expected to be achieved in 2025," Fitch said.

The Domestic Debt Exchange Programme introduced by the Akufo-Addo government aimed to amend the terms of interest and repayment timelines for Ghanaians who loaned money to the government—bondholders.

Essentially, the government replaced the original agreement with bondholders by introducing new interest rates and/or revised durations.

According to the government, the Domestic Debt Exchange Programme was part of a broader agenda to restore the country’s debt and financial sustainability.

The proposed interest rate under this programme was set at 10% per year, with a stepped-up schedule starting at 0% in 2023, increasing to 5% in 2024, and finally reaching 10% from 2025 until maturity.

SA/MA