Ghana’s private sector credit-to-GDP gap fell to a record low by the end of August 2025, signalling deep-rooted fragility in credit expansion despite signs of macroeconomic stabilisation. According to the Bank of Ghana’s September Monetary Policy Report, the negative and widening gap indicates that lending to the private sector remains well below its long-term trend, raising concerns about the capacity of businesses to finance growth, production, and job creation. The finding underscores a structural weakness in Ghana’s credit transmission mechanism, even as the broader banking sector shows signs of recovery following the severe shocks of the Domestic Debt Exchange Programme (DDEP) in 2023.
The report paints a mixed picture: while credit delivery to the real economy remains subdued, the banking sector’s overall soundness has continued to strengthen. The Banking Sector Soundness Index rose above its long-term average and is now approaching pre-DDEP levels, reflecting improved solvency, stronger liquidity buffers, and rising profitability. This resilience suggests that Ghana’s financial institutions are successfully rebuilding balance sheets after absorbing substantial losses during the debt restructuring, which forced banks to revalue domestic bond holdings and increase provisioning for non-performing assets.
However, the improvement in stability has come at the cost of risk appetite. Many banks remain cautious about extending new credit, preferring to consolidate capital and prioritise short-term liquidity management amid lingering uncertainty over fiscal consolidation, inflation, and exchange rate volatility. This conservative posture has slowed the flow of credit to productive sectors such as manufacturing, agriculture, and trade, limiting private investment and output growth. Analysts warn that the persistence of this credit shortfall could undermine Ghana’s medium-term recovery prospects, particularly as fiscal policy constraints restrict the government’s ability to sustain growth through public spending.
The report also notes that while the ratio of non-performing loans (NPLs) remains elevated, it has shown marginal improvement. The central bank attributes this to banks’ intensified recovery efforts and gradual improvement in borrower repayment capacity as inflationary pressures ease and exchange rate stability returns. The ongoing macroeconomic rebound, driven by tighter monetary policy and fiscal reforms under the International Monetary Fund (IMF) programme, is expected to support asset quality improvements and restore confidence in credit markets over time.
Nevertheless, the continued decline in private sector credit relative to GDP exposes a critical gap between financial system stability and economic dynamism. The Bank of Ghana’s findings suggest that while the sector has regained resilience, its capacity to serve as a channel for growth remains constrained. This paradox highlights a familiar post-crisis dilemma in emerging markets: banks become healthier, but credit growth stalls as risk aversion takes hold.
To address this imbalance, the central bank has called for targeted policy measures to stimulate credit delivery without compromising financial soundness. Such interventions may include enhancing access to long-term funding through development finance institutions, expanding credit guarantee schemes for small and medium enterprises (SMEs), and improving credit risk assessment frameworks to encourage lending to productive sectors. The government’s ongoing efforts to deepen the domestic capital market and strengthen the regulatory environment are also expected to support credit intermediation in the medium term.
Despite these efforts, challenges persist. High lending rates, structural bottlenecks in the business environment, and lingering investor caution continue to weigh on private sector confidence. For many firms, particularly smaller enterprises, access to affordable finance remains a binding constraint on growth. Economists argue that unlocking private investment will be essential for sustaining Ghana’s post-DDEP recovery, diversifying exports, and achieving fiscal sustainability.
In sum, while Ghana’s banking sector is showing remarkable resilience, the widening credit-to-GDP gap underscores that stability alone is not sufficient to drive inclusive growth. Unless policy measures succeed in reviving credit flows to the real economy, the country risks entrenching a slow-growth equilibrium in which financial strength coexists with weak productive activity. The coming months will test the central bank’s ability to balance prudence with stimulus, ensuring that stability translates into sustainable economic expansion.
