The International Monetary Fund (IMF) has commended Ghana’s strides in recapitalising its banking sector, while cautioning against rising credit risks that could hinder long-term recovery.
In the latest review, the IMF reported significant improvement in Ghana’s capital adequacy indicators between December 2023 and June 2024. Two-thirds of banks now meet the prudential capital adequacy standards without support measures, bolstered by increased profitability and capital infusions from the Ghana Financial Stability Fund (GFSF) and private investors.
The GFSF alone injected GH¢4.9 billion into the sector.
However, non-performing loans (NPLs) have surged, with the NPL ratio climbing to 24.1% in June 2024, compared to 18.8% in June 2023. This spike was attributed to the economic challenges of 2022, currency volatility, and a comprehensive asset quality review conducted by the Bank of Ghana (BoG).
The IMF stated, “While NPLs are unevenly distributed across banks, the overall trend underscores persistent economic headwinds.”
Despite these concerns, the BoG remains optimistic, describing the banking sector as well-capitalized, liquid, and stable in its October 2024 Monetary Policy Report. Total assets in the industry grew by an impressive 42.4% to GH¢367.2 billion by October 2024, up from just 3.2% during the same period in 2023.
Additionally, solvency metrics improved significantly, with the capital adequacy ratio rising to 14.2% (without reliefs) by October 2024, compared to 13.4% a year earlier.
Yet, elevated credit risks persist. The NPL ratio, although slightly reduced to 22.7% by October 2024, remains a key concern for stakeholders.
The IMF and BoG both emphasize the importance of sustained strategic interventions. While recapitalisation efforts have fortified resilience, addressing the systemic risks posed by rising NPLs is considered critical for ensuring long-term stability and profitability in Ghana’s banking sector.
