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Ghana is at risk of debt default – Fitch

Fitch Ratings Agency Fitch ratings

Thu, 22 Sep 2022 Source: www.ghanaweb.com

A Senior Director at ratings agency, Fitch, Mahin Dissanayake, has stated that Ghana faces a possible debt default.

He explained that banks in Ghana have a high dependence on government securities, therefore any debt distress the government faces will have dire effects on the sustainability of banks.

According to Reuters, Mahin Dissanayake, made the comments on September 21, 2022, at a press briefing.

"Default is a real possibility," he said.

According to him, "Ghanaian banks...hold large volumes of government securities, so debt distress is going to put a lot of stress on the banks” therefore, "the operating environment is looking very fragile."

He also stated that in the case of debt distress, the banking sector will not be the only affected sector.

"We estimate that if there was a 30% haircut, that would make at least several banks insolvent. It's not just the banking sector that would be affected but also insurance companies, pension funds, asset managers - anyone who holds government securities," he stressed.

In August this year, rating agencies downgraded Ghana’s creditworthiness status to junk.

This has affected the country’s ability to secure credit facilities from the global market.

Inflation has skyrocketed to an all-time high of 33.9% s the cedi continues to depreciate against major trading currencies.

Meanwhile, three Ghanaian banks have also been downgraded by Fitch.

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Source: www.ghanaweb.com
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