Banks strain as govt renege on debt payment

The debts are running into million dollars.  The only assurance for some of the financial institutions who spoke to Pulse Business under condition of anonymity, is that government has given a moral assurance to pay back the loans.

Some local banks in the country are in no position to lend to companies in the coming months as their reserves have taken a major hit due to massive default on loan payment dates by government and other major companies in the country.

But they reveal that if government does not pay the loans, they will have to write them off as bad debt, which will have great impacts on their businesses and their willingness to lend to government.

An earlier report by the Joy FM, suggested that a major component of the debt include monies government guranteed on behalf of state institutions.

Another chunk of the debts are monies owed the bulk oil distribution companies who in turn owe these banks.  The banks also revealed that the private creditors are in one way or the other linked to government in terms of contracts granted which they are supposed to prefinance. And as government is delaying in paying these monies, the private contractors cannot redeem the debts to the banks.

The situation is having a negative toll on availability of funds for the private sector to to access.

Experts like the head of Banking and Finance at the University of Ghana Business School, Dr. Godfred Bokpin has charged government to curb its appetite for borrowing in from the local financial market to keep from crowding our the local companies from gaining access to funds.


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