The Economic Adviser to the President, Mr Seth Terkper, has proposed the establishment of a Non-Performing Assets Trust Fund to provide timely financial support to distressed public and private sector organisations and help Ghana withstand future economic shocks.
He said recent experiences, including the banking sector clean-up, domestic debt restructuring, pension fund losses and sovereign debt challenges, had exposed the need for a permanent institutional arrangement to support businesses and public entities facing financial difficulties.
Mr Terkper made the proposal at a Non-Performing Loans (NPLs) Forum organised by the Chartered Institute of Restructuring and Insolvency Practitioners (CIRIP) Ghana in collaboration with the Bank of Ghana (BoG) held in Accra yesterday.
The forum was held on the theme: ‘Financing Distressed Companies: The Impact of Non-Performing Loans (NPLs), IFRS 9 Standards, and Prudential Regulations on Post-Commencement Financing for Distressed Companies under Rescue and Possible Interventions.’
According to Mr Terkper, the proposed trust fund would provide financial assistance to struggling private companies, state-owned enterprises and other public institutions while preventing financial difficulties from developing into wider economic crises.
“We need structures. We need institutions to prevent this from happening again,” he emphasised, adding that governments, like private businesses, needed adequate fiscal buffers to absorb unexpected shocks.
Drawing lessons from the 2008 global financial crisis, Mr Terkper said Ghana needed a permanent framework that could intervene early and support distressed but viable entities before they collapsed.
The Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, said Ghana’s business rescue framework under the Corporate Insolvency and Restructuring Act, 2020 (Act 1015), provided distressed but viable companies with an opportunity to restructure instead of being liquidated.
He, however, cautioned that rescue financing must be based on proper assessments of a company’s commercial viability, supported by credible information, competent management and realistic recovery plans.
Dr Asiama stressed that legal priority for post-commencement financing alone was not enough to make lending decisions prudent.
He said impaired loans must continue to be recognised in accordance with the International Financial Reporting Standards (IFRS 9) and existing prudential regulations.
The governor further indicated that the banking sector had become stronger, with a significant reduction in the industry’s non-performing loans ratio and a robust capital adequacy position.
He, however, urged banks to intensify efforts to reduce non-performing loans to the regulatory target of 10 per cent by the end of the year.
The President of CIRIP Ghana, Mr Felix Addo, expressed concern about the limited use of the business rescue provisions under Act 1015, saying only five companies had sought protection under the law since it came into force.
He attributed the low uptake largely to the absence of post-commencement financing, which he described as a major obstacle to successful business restructuring.
BY KINGSLEY ASARE
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