Ghana’s banking system nears full recovery after debt restructuring shock – IMF

The International Monetary Fund says Ghana is close to completing its banking sector clean-up, with only a few financial institutions left to undergo final stabilisation measures.

Speaking on PM Express Business Edition on Thursday, IMF Mission Chief to Ghana, Dr Ruben Atoyan, expressed confidence that the country’s banking sector reforms have largely achieved their intended objective of restoring stability and strengthening the financial system.

According to him, the recapitalisation measures introduced under Ghana’s IMF-supported programme have successfully returned most banks to the required capital adequacy levels after the severe impact of the Domestic Debt Exchange Programme (DDEP).

“Well, you didn’t name the bank, so I’m not sure what exactly you’re talking about,” Dr Atoyan said when asked about concerns regarding possible government action involving a specific financial institution.

He explained that the financial sector reforms must be viewed within the wider context of Ghana’s economic crisis and the effect of the domestic debt restructuring programme on the banking industry.

“But I think let’s step back and look at what was an important objective for the financial sector reforms. The impact of domestic debt restructuring resulted in significant destruction of capital for the domestic banking system,” he stated.

Banks Restored to Capital Adequacy

Dr Atoyan noted that many banks became undercapitalised following the implementation of the Domestic Debt Exchange Programme, forcing authorities to introduce measures aimed at restoring solvency and confidence in the financial sector.

According to him, the government and regulators have made significant progress in recapitalising affected institutions and ensuring compliance with prudential requirements.

“So many banks were undercapitalised. What the authorities have done has been quite successful during the programme, bringing banks back to full capital adequacy in line with prudential requirements,” he explained.

He added that the clean-up exercise has been completed for almost all banks, with only a small number of institutions still undergoing recapitalisation or resolution processes.

“That has been achieved almost for all the banks, for a couple of banks remaining,” he said.

IMF Expects Stronger Banking Sector by Programme End

The IMF Mission Chief expressed optimism that Ghana’s banking sector will emerge stronger and more resilient by the end of the IMF-supported economic programme.

“We do expect that by the end of the programme, the banking sector will be robust,” Dr Atoyan stressed.

Ghana’s financial sector has undergone extensive reforms in recent years following the sovereign debt crisis and the implementation of the Domestic Debt Exchange Programme, which significantly weakened the balance sheets of several banks and financial institutions.

The reforms included recapitalisation efforts, regulatory interventions, and measures designed to restore liquidity, solvency, and investor confidence within the banking industry.

The IMF believes the reforms have strengthened the resilience of Ghana’s financial system and positioned the sector for a more stable post-programme recovery phase.