A former President of the Ghana Association of Banks, (GAB) Alhassan Andani, has raised serious issues with the current form of the Domestic Debt Exchange (DDE) programme, describing it as not good enough to “cushion” commercial banks in Ghana.
Mr. Andani said the deal in its current state will not address challenges facing the banking sector as government defaults on its debt obligations.
He made the statements on PM Express Business Edition on January 26, 2023 with host George Wiafe.
Expressing his disappointment, Mr. Andani said it’s unfortunate that banks have to suffer for government’s inaction.
“The banks were really doing very well, even as at the end of December 2022 and on their way to make some strong profit for last year”, he disclosed.
He regretted that a lot of the banks will have their profit for 2022 wiped off, as a result of the DDE.
When asked if he would sign on to the deal as a shareholder of any bank in Ghana, Mr. Adani said no.
“The current deal might make a lot of banks worse off, rather than improve their situation”, he stressed.
He also demanded for more clarity on the proposed Ghana Stabilisation Fund and how it will support banks affected by the DDE.
Government’s deal with GAB
Government through the Ministry of Finance on January 23, 2023 reached an agreement with the GAB to participate in DDEP.
The new agreement encompasses final improvements to the terms of the programme.
These include; an agreement to pay 5% coupon for 2023 and a single coupon rate for each of the twelve (12) new bonds resulting in an effective coupon rate of 9%, clarity on the operational framework and terms of access to the Ghana Financial Stability Fund (GFSF) and the removal or amendment of all clauses in the Exchange Memorandum that empowers the Republic to, at its sole discretion, vary the terms of the Exchange.
Should government extend the DDE?
Mr. Andani is of the view that the January 31, 2023 deadline should be extended to ensure that all the stakeholders secure a better deal that will not lead to the collapse of their businesses.
According to him, the time constraint could be a major challenge for the banks in securing a good deal.
Financial sector confidence and the DD
Mr. Andani was worried about the long term effect of the DDE on the financial sector and bonds issues.
“We have always trusted in “sovereign papers” issued by the Republic of Ghana, however current development may raise a lot of questions going forward”, he said.
He, however assured that depositors funds are safe and there is no need for panic.
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