DDEP may necessitate another recapitalization exercise for banks -Dr. John Kwakye

Economist and Director of Research at the Institute of Economic Affairs (IEA) Dr. John Kwakye is forecasting  Ghana’s banking sector may undergo another round of recapitalization in 2025, following the appointment of Dr. Johnson Asiama as new governor of the Bank of Ghana.

He made the forecast during an interview on the Beyond the Numbers show on Joy News.

Dr. Kwakye warned that the sector remains under pressure, largely due to the impact of the Domestic Debt Exchange Programme (DDEP), which has weakened the balance sheets of banks and increased the number of non-performing loans (NPLs).

“The banking sector is also coming under stress again because they suffered from the DDEP. And non-performing loans are rising,” he said adding that “It looks like there may be a need for another round of recapitalization of banks.”

The Bank of Ghana (BoG) has already approved recapitalization plans for undercapitalized banks, requiring them to inject at least one-third of the necessary capital annually over a three-year period, ending in 2025. This phased approach aims to strengthen the industry and restore stability.

Additionally, the BoG has introduced stricter penalties for banks that fail to meet minimum capital requirements, signaling its determination to safeguard financial stability.

Beyond the banking sector, Dr. Kwakye also raised concerns about high inflation and currency depreciation, stressing the need for new economic strategies.

“Look, inflation is still stuck up there in the 20s. It’s not coming down. We need to find a new approach, beyond the narrow inflation-targeting framework to address the problem,” he noted. “The exchange rate is still depreciating very fast.”