Banks' Non-Performing Loan ratio declines to 16.1 but elevated credit risk remain a key vulnerability- BoG Governor

Ghana's banking sector posted strong growth in the first half of 2026, with total industry assets surpassing GH¢500 billion, while banks recorded improved capital strength, better asset quality, and enhanced resilience despite persistent credit risks.

Governor of the Bank of Ghana (BoG), Dr. Johnson Pandit Asiama, announced that the country's banking industry remains on a solid recovery path, supported by stronger deposits, increased borrowings, and higher shareholders' funds.

Speaking during the 131st Monetary Policy Committee (MPC) press conference in Accra on Wednesday, July 23, Dr. Asiama said the banking sector continued to demonstrate resilience amid both domestic and global economic challenges.

According to the Governor, total assets in Ghana's banking sector increased by 30.7 percent year-on-year to GH¢502.4 billion in June 2026.

The growth was largely driven by sustained expansion in customer deposits, borrowings, and improved capital positions of banks, reflecting renewed confidence in the financial system.

The strong asset growth underscores the continued recovery of Ghana's banking industry following recent financial sector reforms and broader macroeconomic stabilization efforts.

Dr. Asiama disclosed that the banking sector's solvency position strengthened considerably over the past year.

The industry's Capital Adequacy Ratio (CAR) improved to 20.4 percent in June 2026, up sharply from 10.6 percent recorded during the same period in 2025.

The improvement indicates that banks now hold stronger capital buffers to absorb potential losses and support lending activities while complying with regulatory requirements.

A higher capital adequacy ratio is generally viewed as a key indicator of financial stability and banking sector resilience.

Asset quality also improved during the review period, with the industry's Non-Performing Loan (NPL) ratio falling significantly.

According to the Governor, the NPL ratio declined to 16.1 percent in June 2026 from 23.1 percent a year earlier.

The reduction reflects improvements in loan recovery efforts, stronger risk management practices, and gradual improvements in economic conditions that have strengthened borrowers' repayment capacity.

However, Dr. Asiama cautioned that elevated credit risk remains one of the sector's major vulnerabilities.

Despite the positive trend, he said banks must continue adhering to prudential regulations and sound risk management practices to further reduce bad loans and improve overall asset quality.

Turning to developments in the external sector, Dr. Asiama said Ghana's economy recorded a strong performance during the first half of 2026 despite global economic uncertainties.

He noted that export earnings remained robust, supported mainly by increased receipts from gold and cocoa exports.

Although the country's import bill rose sharply due to higher energy costs linked to the ongoing Middle East conflict, Ghana still recorded a significant improvement in its trade balance.

The trade surplus increased to US$8.8 billion during the first half of 2026, compared with US$5.8 billion recorded during the same period in 2025.

Similarly, the current account surplus expanded to US$5.1 billion from US$4.1 billion over the same period.

According to the Governor, the stronger current account performance, combined with improvements in the capital account, strengthened Ghana's overall balance of payments position.

Despite stronger external sector performance, Ghana's Gross International Reserves declined modestly during the review period.

At the end of June 2026, reserves stood at US$12.9 billion, equivalent to five months of import cover, compared with US$13.8 billion, or 5.7 months of import cover, at the end of December 2025.

Dr. Asiama explained that the decline was largely due to increased payments for imported energy following the escalation of the Middle East conflict.

Nevertheless, he emphasized that Ghana's current reserve position remains adequate to cushion the economy against external shocks and support exchange rate stability.

The Governor also highlighted recent developments in the foreign exchange market.

He said the Ghana cedi experienced increased demand pressures in May 2026 but has since recovered.

As of July 17, 2026, the cedi had recorded a cumulative depreciation of 9.5 percent against the U.S. dollar for the year.

The Bank of Ghana continues to monitor developments in the foreign exchange market as part of its broader efforts to maintain macroeconomic stability.

The Monetary Policy Committee decided to maintain the policy rate at 14 percent, citing growing global economic uncertainties and emerging inflation risks.

According to Dr. Asiama, renewed conflict in the Middle East has disrupted international trade routes and triggered renewed volatility in global energy markets.

These developments have increased production and transportation costs globally, posing risks to inflation and economic growth.

He noted that while inflation has eased in many countries, recent increases in energy prices have slowed disinflation, prompting several central banks around the world to pause planned interest rate cuts.

Although global financial conditions remain relatively supportive, Dr. Asiama warned that prolonged geopolitical tensions and tighter financial conditions could negatively affect emerging and developing economies, including Ghana, through trade and financial channels.

The Bank of Ghana said it will continue to closely monitor domestic and international developments and implement appropriate monetary policy measures to preserve price stability and support sustainable economic growth.