The Bank of Ghana (BoG) has written off GHS1.2 billion of Non-Performing Loans (NPLs) on the books of banks in the country.
This means that the central bank will consider GHS1.2 billion worth of credit given out as bad loans that cannot be retrieved.
NPLs hit 21.3 per cent as of August 2018.
Within the same period in 2017, NPLs were at 21.9 per cent, indicating a year-on-year drop.
Speaking at a press conference to announce the policy rate, the Governor of the Bank of Ghana, Dr Ernest Addison, stated that the move is necessary to reduce the high NPL level.
He explained that the banks have gone through all the required processes to conclude that the loans cannot be retrieved, hence the write-off.
“You have NPLs that is a complete loss. The category of those that are completely bad. The bank has a policy – once you have NPLs that are complete losses, you have to make full provision for them,” he said.
“Over the years, the banks have fully provided for this loss component and we are saying that if you have fully provided for these losses, maybe it is about time you wrote them off so that our NPL numbers can come down,” he added.
Dr Addison stressed that the exercise is part of measures aimed at cleaning the financial system to make it robust.
“The most recent forecasts at this MPC round show some marginal elevation of the disinflation path taking into account the possible second-round effects of the recent increases in petroleum prices, exchange rate depreciation, effects of recent increases in taxes, pick up in global inflation as well as the effects of the tight global financing conditions,” he added.