Ghana’s banks are still grappling with a surge in bad loans, more than two years after the country’s sovereign default, a result that shows when fiscal stress and tight monetary policy are at play in the financial system.
When the government restructured about half of its debt in 2022, forcing lenders to swap GH¢17.5 billion in local bonds for longer-term, lower-yielding securities, banks took an immediate hit. But the pain deepened as the central bank lifted rates above 30% to fight inflation, leaving borrowers unable to keep up with repayments.
Non-performing loans stood at 15% of gross loans in December 2022 and jumped to 24% by mid-2024, according to the African Development Bank’s 2025 outlook. The report cited by The High Street Journal, described Ghana as a “textbook case” of the sovereign-bank nexus, where fiscal distress spills into the financial system.
The strain remains visible. By April 2025, the NPL ratio was 23.6%, with the stock of bad loans topping GH¢21 billion. Agriculture and transport are hardest hit, with default ratios above 50%. Credit growth has slowed sharply even as banks post profits on paper, underscoring how lending appetite has dried up.
The AfDB warned that Ghana’s experience highlights how sovereign stress and tight monetary policy can interact to deepen financial fragility. High rates help contain inflation and lift bank margins, but they also squeeze borrowers, feeding into defaults and limiting new credit.
The Bank of Ghana has tightened loan classification rules, ordered faster write-offs and raised reserve requirements for weaker lenders. Regulators want the NPL ratio cut to 10% by December 2026.
Whether banks can meet that target is unclear. For now, they remain weighed down by the legacy of the default and the costs of keeping inflation in check.
