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Bank of Ghana Writes Off GH¢4.33 Billion as Bad Debt in 2023

The Bank of Ghana, under the leadership of Dr. Ernest Addison, Governor of the Bank of Ghana, has taken a significant step in managing the country’s financial sector by writing off GH¢4.33 billion as bad debt in 2023. This marks a substantial 79.2% reduction compared to the previous year’s total bad debt, which was estimated at GH¢20.8 billion.

The bad debt, categorized as loan losses, depreciation, and others, has been a longstanding issue in the banking sector, affecting the overall financial stability of the country. However, the Bank of Ghana’s recent actions reflect a concerted effort to address these challenges and improve the sector’s health.

According to reports, banks in Ghana reported lower impairments on financial assets in 2023, indicating a positive trend in asset quality. Total provisions and impairments contracted significantly by 79.2% in December 2023, following a sharp increase in December 2022 due to substantial impairments on restructured bonds.

Despite these improvements, asset quality risks remained elevated in December 2023, reflecting the lingering impact of the macroeconomic challenges faced in 2022. The industry’s non-performing loans (NPL) ratio increased to 20.7% in December 2023, up from 16.6% in December 2022. Similarly, the NPL ratio adjusted for the fully provisioned loan loss category increased from 6.6% to 8.4% during the same comparative period.

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The NPL stock saw a significant increase of 37.4% to GH¢15.8 billion in December 2023. Credit growth also moderated in 2023, attributed to a general risk aversion by banks and a softening in credit demand following the recent macroeconomic challenges. Growth in gross loans and advances moderated to 10.9% in December 2023, down from 29.1% in December 2022, while growth in net loans and advances moderated to 9.4%, from 26.8% over the same review period.

The Bank of Ghana’s efforts to address bad debt and improve asset quality are commendable, as they are essential for ensuring the stability and growth of Ghana’s financial sector in the long run.

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