Ghana's commercial banks pursue recovery of ¢2.4 billion bad debt

Ghana's bad debt: The Chief Executive of the Ghana Association of Banks (GAB), John Awuah, has reassured that commercial banks in Ghana are actively pursuing the recovery of over 2.4 billion Ghanaian Cedi in loans classified as bad debt. He said that these debts have not been entirely written off but are termed as such for accounting purposes. Awuah revealed that the GAB has initiated discussions with the Office of the Chief Justice to seek legal assistance in resolving issues related to loan recovery. 

Additionally, the GAB is collaborating with the Lands Commission to streamline the documentation of land titles used as collateral for loans. These efforts are aimed at strengthening the financial institutions' operations in the country.

53.6 per cent increase in Industry NPL

The latest data from the Bank of Ghana's Monetary Policy Report, as of September 2023, indicated a 53.6 per cent increase in Industry Non-Performing Loans (NPL), amounting to 14.5 billion Ghanaian Cedi. This rise is attributed partly to the revaluation of foreign currency NPLs and the deterioration of domestic currency loans. The private sector held the majority of non-performing loans, accounting for 95.0 per cent, while the public sector's share increased to 5.0 per cent. Awuah cautioned that this situation could potentially affect the cost of credit for new loans but clarified that individuals and institutions with good projects should still be able to secure credit from commercial banks.

Regarding the proposed Eurobond debt restructuring, where the government is expecting a 40 per cent "haircut" for Eurobond holders, Awuah expressed concerns about its potential impact on commercial banks. However, he believed the impact might be less significant than that of the Domestic Debt Exchange Programme and remained optimistic that the government would review the proposed "haircut."