Phase 2 of DDEP had relatively low impact on 2023 audited financial performance – BoG

Phase 2 of the Domestic Debt Exchange Programme (DDEP) had a relatively low impact on the 2023 audited financial performance of banks, then Bank of Ghana has disclosed in its 2024 Financial Stability Review.

This is due to the lower levels of holdings and better restructuring terms.

In addition, some impairments had already been booked by banks in 2022 while banks generally reported a strong rebound in financial performance in 2023.

The report revealed that in separate arrangements, the Government of Ghana negotiated and restructured bond holdings of pension funds totalling GHS30.01 billion in August 2023.

Looking ahead, it said the external debt restructuring, particularly, the Eurobonds, will have implications for further impairments by banks and other participating financial institutions.

“The regulatory reliefs put in place by financial sector regulators, the implementation of recapitalisation plans and the establishment of the Ghana Financial Stability Fund will help mitigate the impact of the GoG [Government of Ghana] debt operation on the financial sector”, it mentioned.

“Additionally, the Financial Sector Strengthening Strategy (FSSS) was developed in 2023 by financial sector regulators to coordinate their policy regulatory intervention in ensuring that risks to the financial system are promptly identified and addressed”, it added.

On the other hand, the report pointed out that the domestic debt restructuring has created some fiscal space for the government and contributed to lowering the debt to Gross Domestic Debt ratio.

On July 14, 2023, the Government of Ghana launched the second phase of the Domestic Debt Exchange Programme (DDEP).

It involved the restructuring of Cocoa Bills (GH¢8.1 billion) and locally issued US dollar denominated bonds ($808.99 million).