Banks Fear Liquidity Crisis as Cocoa Bond Dispensation Nears Expiry

The looming expiration of the special dispensation on restructured cocoa bonds under the Domestic Debt Exchange Programme (DDEP) has sparked concerns among banks, raising fears of a potential liquidity crisis.

Banks worry that market illiquidity and COCOBOD‘s financial position may make it difficult to sell these bonds, posing risks to the financial sector.

These concerns were raised at a high-level meeting between the Ghana Association of Banks (GAB) and the Bank of Ghana (BoG), aimed at fostering an open dialogue between banks and the regulator to build trust and consensus on key financial policies.

The meeting provided a platform for banks to voice their challenges, with Governor of the Bank of Ghana, Dr. Johnson Asiama, addressing their concerns.

GAB members emphasized that the expiration of the special dispensation could lead to liquidity constraints, impacting banks’ ability to manage their balance sheets effectively.

They urged the central bank to consider measures to mitigate potential disruptions, such as extending the dispensation or implementing support mechanisms for affected financial institutions.

Dr. Asiama acknowledged the banks’ concerns and assured them that the central bank is closely monitoring the situation. He reiterated BoG’s commitment to ensuring financial stability and maintaining confidence in the banking sector.

He further reaffirmed the central bank’s pledge to double agricultural financing and support the Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL) in raising additional guarantee funds.

However, he also encouraged commercial banks to take the lead in stakeholder engagements to improve and de-risk selected agricultural value chains.

Last Updated on May 11, 2025 by samboad