International score company, Fitch, has warned of extra score downgrades of African banks in 2023 with Ghana’s debt restructuring anticipated to have an effect on each home and regional banks. According to its 2023 Outlook file, sovereign debt misery used to be the key chance to African banks’ monetary profile.

“We are most concerned about potential sovereign defaults with many African governments facing very high and increasing debt servicing burdens exacerbated by rising interest rates, US dollar strength and unfavourable external fund-ing conditions. The Ghana debt restructuring will affect domestic as well as regional banks”.

It defined that African banks’ credit score drivers will likely be undermined by way of each international and home shocks in 2023.

“Operating environments will be affected by a combination of high inflation, rising rates, currency depreciation and hard currency shortages, but moderate Gross Domestic Product growth, with no major African economy entering a recession, combined with banks’ relatively good funda-mentals and buffers, will prevent a significantly more negative scenario,” it famous.

Fitch additional stated banks’ sov-ereign debt dangers have larger, with some African governments suffering with debt-servicing burdens and negative exter-nal investment prerequisites.

It stressed out that the banks might be downgraded due to additional sovereign downgrades however the largest chance comes from doable sovereign defaults that might have an effect on banks in those coun-tries in addition to regional banking teams.

“Asset quality risks will return to be more prominent in 2023. Nevertheless, we assume only a moderate increase in impaired loan ratios in most countries. A sharp fall in commodity prices as a result of the global slowdown or economic developments in China could cause a faster increase in loan quality weakening.”

Fitch persisted that banks will alternatively stay winning, ben-efitting from emerging rates of interest and nonetheless-enough mortgage enlargement (above GDP enlargement) which can mitigate a reasonable upward thrust in credit score prices.

It concluded that capitalisa-tion, investment and liquidity stay enough, with the latter specifically, underpinning banks’ standalone creditworthiness, mentioning, “External funding will be scarce and expensive”.

Author: Ghanaian Times

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