ACCRA
Ghana’s banks are recovering alongside the broader economy, but a stubborn stock of bad loans risks becoming a drag on the next phase of the country’s rebound.
The Bank of Ghana warned Monday that elevated nonperforming loans can weaken lending, profitability, liquidity and solvency, potentially threatening financial stability.
The central bank is pressing lenders to strengthen credit-risk management and clean up their balance sheets as it steps up oversight of the financial system.
The industry’s nonperforming-loan ratio fell to 18% in April from 23.6% a year earlier, according to the central bank. The improvement has come alongside stronger profitability, capital levels and credit growth, but bad loans remain high enough for policymakers to identify credit risk as a key vulnerability.
The regulator wants financial institutions to reduce NPL ratios to 10% or less by the end of 2026. Banks with particularly elevated levels can face restrictions on dividend payments and bonuses as authorities push lenders to repair asset quality.
The effort adds another dimension to Ghana’s economic stabilization drive.
On Aug. 21, the Bank of Ghana approved a new foreign-exchange operations framework designed to make its interventions in the currency market more predictable while preserving a flexible, market-determined exchange rate.
Together, the measures underscore the central bank’s challenge: consolidating Ghana’s improving macroeconomic position while tackling weaknesses in the financial system that could constrain growth.
Lower inflation, stronger foreign-exchange reserves and a firmer cedi have helped restore confidence after the economic crisis that erupted in 2022.
But banks carrying large stocks of distressed loans face a different constraint. Poor asset quality can make lenders more cautious about extending credit just as businesses seek financing to invest and expand.
That makes the health of bank balance sheets increasingly important to Ghana’s recovery. A stronger currency and lower inflation can improve the economic backdrop, but the benefits may take longer to reach businesses and households if lenders remain burdened by problem loans.
From Crisis to Recovery
Ghana entered a severe economic and financial crisis in 2022 after years of mounting fiscal and debt pressures were compounded by external shocks. The country lost access to international capital markets as debt climbed to 92.4% of gross domestic product, inflation surged and the cedi depreciated sharply.
The government subsequently embarked on a sweeping debt restructuring and secured an International Monetary Fund-backed program aimed at restoring fiscal and debt sustainability.
By 2025, the restructuring was largely complete, with negotiations continuing over remaining external commercial debt representing less than 5% of total pre-restructuring debt, according to the World Bank.
The economic picture has since improved markedly. Real GDP expanded 5.8% in 2024 and 6% in 2025, supported by services and a recovery in agriculture. Strong gold exports helped produce a current-account surplus in 2025, while foreign-exchange reserves rose to more than 5.7 months of import cover and the cedi strengthened.
Headline inflation slowed to 3.3% in February 2026, helped by the currency’s appreciation and tighter fiscal and monetary policy. The government also recorded a primary fiscal surplus of 2.5%, exceeding its 1.5% target, according to the World Bank.
Those gains have shifted the focus from crisis management toward making the recovery durable. For the banking industry, that means turning stronger capital and profitability into healthier loan books.
Bringing the NPL ratio closer to the central bank’s 10% target would give lenders more room to extend credit without taking on excessive risk.
Failure to make that adjustment could leave bad loans as a lingering constraint on investment and growth even as Ghana’s headline economic indicators improve.
For Ghana, the durability of stabilization may hinge as much on cleaning up loan books as on taming inflation or stabilizing the cedi.
With the cedi now ranking among the strongest currencies in Africa, Ghana’s ability to turn healthier bank balance sheets into sustained credit growth will be a decisive test of its recovery.
