Huge losses under DDEP has significantly weakened banking sector’s capitalisation – Fitch

Rating agency, Fitch, has warned that the large losses imposed on bondholders under the Domestic Debt Exchange Programme (DDEP) has significantly weakened the banking sector’s capitalisation.

According to the UK-based firm, the restructuring of outstanding sovereign debt and impending loan quality problems will add to capital pressures.

Fitch considers solvency issues to be concentrated at the domestic banks.

“The restructuring of outstanding sovereign debt and impending loan quality problems will add to capital pressures. Fitch considers solvency issues to be concentrated at the domestic banks.

It, however, said regional and foreign banks are better because of their strong buffers”.

The UK-based firm had earlier said that Ghanaian banks’ capital will still weaken significantly as a result of Ghana’s sovereign domestic debt restructuring.

Fitch estimates the current account deficit will narrow to 0.8% of Gross Domestic Product (GDP) in 2023, from 2.1% in 2022, supported by suspension of external debt service and improved terms of trade. In 2024 and 2025, the current account deficit should remain moderate at 2.1% and 1.9% of GDP, respectively.

This is supported by suspension of external debt service and improved terms of trade.

In 2024 and 2025, the capital account deficit, it said, should remain moderate.

“A reduced current account deficit together with international financial institutions’ disbursements and external debt restructuring should enable accumulation of reserves over 2023-2025, reaching 2.8 months of current external payments by 2025, from 1.7 months in 2022.