Ghana Inflation Dips, Debt Exchange Threatens Banks’ Capital
Ghana’s headline inflation rate declined to 53.6% year on year in January 2023 after hitting a more than two-decade high of 54.1% in December, the statistics service said on Wednesday.
Consumer price index drops amidst debt exchange programme with investors, a development that Fitch Ratings said will impact local banks significantly.
The government is battling with worst economic crisis in years as capital outflows, currency pressures and a crushing debt-service burden wreak havoc on public finances.
The government on Tuesday announced the closure of a long-delayed domestic debt exchange plan, but it must now restructure its external obligations before obtaining executive board approval for a $3 billion rescue package from the International Monetary Fund.
Debt exchange to ‘significantly weaken’ some banks – Fitch
A domestic debt exchange implemented by Ghana will “significantly weaken” banks’ capitalisation, leading to material shortfalls at some, ratings agency Fitch said on Wednesday.
The exchange, which extended maturity dates on a range of bonds due in 2023 to between 2027 and 2033 and swapped other bonds for 12 issues maturing between 2027 and 2038, is part of a restructuring of domestic and external debt that is a condition of a $3 billion International Monetary Fund (IMF) bailout.
Fitch said it had estimated the original terms of the exchange would inflict a net present value loss on creditors of about 50%. “The final terms provide only a small reduction in this,” it said. # Ghana Inflation Dips, Debt Exchange Threatens Banks Capital
