Ghana recorded the highest banks’ holdings of government debt in Sub Saharan Africa in 2023, Fitch Solutions has revealed.
In terms of government debt to Gross Domestic Product (GDP), the country came second behind Angola.
Kenya, South Africa and Senegal came 3rd, 4th and 5th respectively.
The report said banks in Sub-Saharan Africa including Ghana will continue to face risks associated with sovereign exposure throughout the forecast period. Nonetheless, these risks are expected to diminish over time.
During the Covid-19 pandemic, banks’ holdings of government debt and claims to the public sector surged as governments increased borrowing to fund additional expenditures.
With limited access to international markets owing to prohibitive costs, the report, said domestic banks became the main financiers. This dependence, it added, poses significant risks to banks, particularly when government finances are strained.
“This dependence poses significant risks to banks, particularly when government finances are strained. For instance, Ghana's default on its domestic and external debt in December 2022 led to considerable losses for banks participating in its domestic debt exchange programme”.
“As can be seen in the chart below, banking sectors in markets with elevated levels of government debt typically have the highest exposure to the government through loans or government securities holdings. We expect that the average debt-to-GDP ratio for the region will fall in the coming years, after peaking in 2023, boding well for our view that banks will reduce exposure to the sovereign”, it stressed.
![](https://www.myjoyonline.com/wp-content/uploads/2024/06/Capture-10.png)
Reopening of Africa’s Eurobond market in 2024 marks positive shift
The report continued that the reopening of Africa's Eurobond market in 2024, following a hiatus of more than a year, marks a positive shift, with successful, oversubscribed bond issuances from countries such as Côte d'Ivoire, Benin, and Kenya.
This resurgence, it said, provides government with a source of financing other than banks, offering banks the opportunity to lessen their exposure to sovereign debt, potentially liberating resources for increased lending to the private sector. However, this transition is expected to be gradual, as loan quality continues to be a concern and private sectors present higher risk profiles than sovereigns.
Latest Stories
-
Fuel price increase: diesel selling at ₵14.92, petrol ₵14.80 a litre
14 mins -
The container with equipment for the ambulances have been emptied at Tema Port – Jakpa
17 mins -
My mom offered to give me her pension so that I quit my job – Erastus Asare Donkor
18 mins -
3 million children above 5 to receive Ghana Cards – NHIA
23 mins -
NHIA to roll out a scheme to cover NCDs from July – Dr Aboagye
24 mins -
Building Bytes brings together Ghana’s tech leaders for Demo Fridays
25 mins -
We’ve started preseason in readiness for CAF Champions League – Samartex General Manager
40 mins -
Election 2024: EC must prepare for possible cyber-attack on December 7 – ACDT
40 mins -
Noka residents grateful to award–winning teacher for new school initiative
41 mins -
Cement manufacturers contemplate appealing to EMT over L.I to regulate prices
46 mins -
The ambulances were tailor-made to suit government’s specification – Jakpa insists
49 mins -
Ambulance case: Big Sea rather incurred huge losses occasioned by government – Jakpa to AG
51 mins -
I didn’t receive 50% of money paid under ambulance contract – Jakpa
54 mins -
Over 1,025 cylinders deployed to six local communities
58 mins -
Sarkodie will perform at 2024 Olympics in France – DJ Mensah
1 hour