By Temilola Aderonke ONALAJA
Ghana’s Domestic Debt Exchange Programme (DDEP) has significantly impacted the country’s banking sector, leading to liquidity constraints and reduced credit availability.
This article examines the current financial landscape, identifies key challenges, and proposes strategic interventions rooted in the S.T.A.R. Strategy: Synergy, Technology, Analytical Precision, and Risk Mitigation – to stabilize and revitalize the banking sector.
In response to mounting public debt, the Government of Ghana initiated the DDEP in December 2022, restructuring approximately GH¢137 billion of domestic bonds (Ministry of Finance, 2022).
While this move aimed to restore debt sustainability, it inadvertently strained the banking sector, which held a significant portion of these restructured instruments. The resultant liquidity challenges have hindered banks’ ability to extend credit, particularly to small and medium-sized enterprises (SMEs), thereby affecting economic growth.
- Liquidity constraints: The restructured bonds under the DDEP have longer maturities and lower coupon rates, leading to reduced interest income for banks. This has constrained their liquidity positions, limiting their capacity to support lending activities (Bank of Ghana, 2025).
- Capital adequacy pressures: The impairment of assets due to the DDEP has eroded banks’ capital buffers. Although the Bank of Ghana has implemented measures to support recapitalization, challenges persist in restoring capital adequacy ratios to pre-DDEP levels (Fitch Ratings, 2025).
- Credit contraction: The liquidity and capital challenges have led to a contraction in credit to the private sector. SMEs, which are vital to Ghana’s economy, have been disproportionately affected, facing difficulties in accessing financing for operations and expansion (IMF, 2025).
To address these challenges, the following strategic interventions are proposed:
- Synergy: Foster collaboration between banks, fintech companies, and development finance institutions to create innovative financing solutions. Such partnerships can leverage technology and alternative credit assessment models to extend credit to underserved sectors.
- Technology: Invest in digital banking platforms and automation to enhance operational efficiency. Implementing advanced analytics can improve risk assessment and credit scoring, enabling banks to make informed lending decisions even in a constrained liquidity environment.
- Analytical precision: Conduct regular stress testing and scenario analysis to assess the resilience of banks under various economic conditions. This proactive approach allows for timely identification of vulnerabilities and the implementation of corrective measures.
- Risk mitigation: Develop comprehensive risk management frameworks that encompass credit, market, and operational risks. Diversifying asset portfolios and establishing contingency funding plans can enhance banks’ ability to withstand future shocks.
Policy recommendations
- Regulatory support: The Bank of Ghana should continue to provide regulatory relief and support mechanisms to facilitate banks’ recapitalization efforts and encourage prudent lending practices.
- Incentivize SME lending: Implement policies that incentivize banks to lend to SMEs, such as credit guarantees or interest rate subsidies, to stimulate economic activity and job creation.
- Enhance financial literacy: Promote financial literacy programs to educate SMEs on financial management and the importance of maintaining good credit histories, thereby improving their access to financing.
To conclude,the post-DDEP era presents significant challenges for Ghana’s banking sector, particularly concerning liquidity and credit availability. By adopting the S.T.A.R. Strategy, banks can navigate these challenges, restore stability, and contribute to the country’s economic recovery. Collaboration among stakeholders, technological advancement, analytical rigor, and robust risk management are essential components of this strategic approach.
>>>the writer is a UK-trained finance strategist expert, fellow of multiple financial institutes, and creator of the S.T.A.R. Strategy. She has served as Financial Controller across multinational companies and has advised healthcare and infrastructure firms on cost discipline, revenue optimization, and strategic liquidity management.
References
- Bank of Ghana. (2025). Financial Stability Review 2023. Retrieved from https://www.bog.gov.gh/news/financial-stability-review-2023/
- Fitch Ratings. (2025). Ghanaian Banks’ Prospects Improve as Sovereign Restructuring Nears Completion. Retrieved from https://www.fitchratings.com/research/banks/ghanaian-banks-prospects-improve-as-sovereign-restructuring-nears-completion-14-01-2025
- International Monetary Fund. (2025). IMF Reaches Staff-Level Agreement on the Fourth Review of the Extended Credit Facility with Ghana. Retrieved from https://www.imf.org/en/News/Articles/2025/04/14/pr-25107-ghana-imf-reaches-agreement-on-the-4th-review-of-ecf
- Ministry of Finance. (2022). Government of Ghana Domestic Debt Exchange: Potential Financial Sector Impacts and Mitigating Safeguards. Retrieved from https://mofep.gov.gh/press-release/2022-12-29/government-of-ghana-domestic-debt-exchange-potential-financial-sector-impacts-and-mitigating-safeguards.
