Scores company, Fitch, has said that Ghana’s exterior debt restructuring is anticipated to be concluded in early 2025.
In response to the UK-based agency, this might result in an improve of Ghana’s long-term Issuer Default Score (IDR) and assist cut back macroeconomic volatility, thereby decreasing dangers to banking capitalization.
These expectations, it mentioned underpin its bettering outlook for the Ghanaian banking sector in 2025.
In a current webinar, an Affiliate Director at Fitch, Elie Maalouf, mentioned the outlook of Ghana’s banking surroundings will enhance, enabling capital ratios to proceed recovering.
He identified that the overwhelming majority of banks will likely be capital grievance this yr.
“Our expectation is that profitability [banks] will stay robust in 2025 as a consequence of continued excessive Treasury invoice yields. It will enable capital ratios to proceed recovering and provides us confidence that the overwhelming majority of banks will likely be comfortably capital-compliant on the finish of 2025, when losses referring to the February 2023 DDEP [Domestic Debt Exchange Programme] are absolutely phased out”.
Solvency Pressures
He added that solvency pressures stemming from the sovereign default haven’t translated into heightened liquidity threat.
That is primarily because of the banking sector’s funding construction, which is dominated by buyer deposits and contains restricted market and exterior debt funding, which Fitch considers much less secure sources of funding.
“Overseas foreign money deposits are important, however non-resident deposits are negligible, which has diminished the banking sector’s publicity to capital flight. The sovereign default is much less the sum deposits migrating from smaller banks to perceived safer, bigger foreign-owned banks, however we’re not conscious of any financial institution experiencing a deposit run”, he added.
He continued that international foreign money liquidity protection is anticipated to stay strong, with offshore financial institution placements tending to cowl a excessive proportion of international foreign money deposits and short-term funding.
Because of this, he alluded {that a} excessive variety of Ghanaian banks are subsidiaries of huge pan-African banking teams, and “we imagine their international foreign money liquidity will proceed to profit from atypical help from their dad and mom”.
Nevertheless, he concluded that native foreign money liquidity will stay tight, with the banking sector reliant on treasury payments and money for liquidity protection.
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