Banking sector is demonstrating significant recovery – Prof. Boadi

Ghana’s banking sector is demonstrating significant recovery and growth one year after the government’s domestic debt exchange programme (DDEP).

The Dean of Accounting and Finance at the University for Professional Studies (UPSA) Professor Isaac Boadi noted that despite the initial shocks, the sector is on a robust path to normalcy and strength.

He pointed out that growth in the sector has picked up and they are getting back to normalcy.

The banking sector showed remarkable performance in 2023, recording a profit of GH₵8.3 billion, a significant turnaround from a loss of GH₵6.6 billion in December 2022.

Prof. Boadi noted that the balance sheets of banks are stronger, with increased assets and improved financial soundness, indicating the sector’s overall growth and resilience.

“Return on equity has gone up drastically, moving from negative to positive growth,” he highlighted the sector’s recovery.

He described the DDEP as an unavoidable but ultimately fruitful measure.

Announced in 2022, the programme required domestic bondholders to exchange their existing bonds for new ones with staggered maturities in 2027, 2029, 2032, and 2037.

The government’s commitment to macroeconomic stability, in line with negotiations with the IMF, included exempting Treasury Bills from the exchange and ensuring no haircut on the principal of bonds.

These measures aimed to minimize the impact on the financial sector and preserve financial stability.

Prof. Boadi emphasized that the program’s implementation had been carefully assessed to safeguard the financial sector.

“The potential impact of the exchange on the financial sector had been assessed by their respective regulators.

“Appropriate measures and safeguards were instituted to minimize the potential impact and ensure financial stability.”

One year on, the numbers suggest that these measures have been successful.

“The banking sector is resilient,” reiterated Professor Boadi, underscoring the sector’s robust recovery and promising outlook.