The Member of Parliament for Bawku Central, Mahama Ayariga has expressed worry over the impact of the Domestic Debt Exchange Program on domestic private banks in Ghana.
According to him, the program will weaken the growth of these banks.
In a letter written to the Governor of the Bank of Ghana (BoG), Dr Ernest Addison, Mr. Ayariga noted that the banks will face capitalization and liquidity problems given that they will not receive timely and appropriate coupon payments from their bondholder – the Government of Ghana.
He noted that though the Government asked the banks to approach the Ghana Amalgamated Trust Plc (GAT) for support from the Ghana Financial Stability Fund (GFSF), it opens them up to a takeover by investors in the GAT, if the Ghana Financial Stability Fund is not wholly publicly funded.
He thus called for more support to ensure the banks do not collapse.
“I contend that the Domestic Debt Exchange Programme will emasculate domestic private banks, as they will face capitalization and liquidity problems given that they will not receive timely and appropriate coupon payments from their bondholder (Government of Ghana)”, he said in the letter.
The government is hoping for an 80% subscription to the debt exchange programme as it structures domestic debt to achieve a 55% debt-to-GDP ratio by 2028.
The Bank of Ghana had already disclosed that the banking sector lost its profitability by almost 20 percent in 2022 adding that the “industry’s Capital Adequacy Ratio (CAR) declined to 16.6 percent” within the same period.
Read Mr. Mahama Ayariga’s full letter here.