Government's decision to retire legacy debts will boost banking industry – Bankers

The Chartered Institute of Bankers (CIB) says the decision by the government to issue new bonds to pay off legacy debts will bring significant relief to the banking industry. Its Chief Executive, Anthony Oppong, told TV3 the decision could result in improved liquidity for banks and consequently bring down the high non-performing loan ratio.

Government is seeking to raise a 10 billion cedi denominated bond, the equivalent of 2.5 billion dollars. Out of the amount, 800 million dollars is owed to local banks by the Bulk Oil distribution Companies.

“In 2015 for example, the total public sector debt to the banks was about 2.2 per cent. In the year 2016, it went up to 14.2. A chunk of this bad debt for the public sector is as a result of debt to these oil companies.

If Government is going to retire these debts it’s really a relief to the banks,” he said. Mr Oppong described the decision as timely since it would help in reviving the banking industry which was on the brink of possible collapse.

He said the payment of funds would also impact positively on the economy including a possible reduction in lending rates. “It will make the banks more liquid and maybe able to start responding to some of these policy rates that the Bank of Ghana has reduced in the last couple of months” he said.