Ghana’s central bank is engaging with local lenders to address a notable increase in non-performing loans, which are at 21.8% for the industry. One lender has an 81% bad loan ratio. The discussions aim to alleviate financial pressures following a government debt restructuring and enhance lending conditions amid economic difficulties.
Ghana’s central bank is currently engaging with local lenders regarding the escalation of non-performing loans, driven in part by a government debt renegotiation. One unnamed lender is facing a staggering bad loan ratio of 81%, while the overall industry reports a non-performing loans ratio of 21.8% as of the end of 2024, significantly increasing from 14.8% in December 2022, when Ghana defaulted on much of its external debt.
Governor Johnson Asiama addressed these concerns at a conference aimed at addressing the country’s economic and debt crises, emphasizing the significant impact of the domestic debt exchange on the financial sector. He noted that the responsibility should not solely fall on the banks since many factors contributed to the rising non-performing loans.
The central bank has initiated discussions with selected domestic lenders, particularly state-owned banks, to identify strategies for decreasing their non-performing loan ratios. Given that domestic banks have been major credit sources for the government, which sought a $3 billion bailout from the International Monetary Fund in 2022, improving the banks’ conditions is deemed essential.
Ghana’s central bank is tackling an alarming rise in bad loans within the banking sector, largely linked to government debt restructuring. While one lender faces an extraordinary 81% bad loan ratio, the overall financial indicators suggest a noteworthy challenge. Ongoing discussions between the central bank and local lenders aim to stabilize the financial system, ease lending rates, and mitigate the impact of currency depreciation and inflation on the economy.
Original Source: www.livemint.com
