Recapitalisation of banks progressing, but credit risks surge – IMF

The International Monetary Fund (IMF) has noted progress in the recapitalization of banks in Ghana but highlighted an increase in credit risks. According to the IMF, overall capital adequacy in the banking sector improved significantly between December 2023 and June 2024.

Approximately two-thirds of banks now meet prudential capital adequacy standards, supported by higher profits and capital injections from the Ghana Financial Stability Fund (GFSF) and private stakeholders. The GFSF alone provided GH¢4.9 billion.

Despite these gains, non-performing loans (NPLs) have risen sharply, outpacing nominal credit growth. The NPL ratio increased to 24.1% by the end of June 2024, compared to 18.8% a year earlier. This uptick is attributed to the lingering effects of the 2022 economic downturn, exchange rate volatility, and a review of banks' asset quality by the Bank of Ghana (BoG).

The BoG's Monetary Policy Report also highlighted the sector's resilience. Total assets rose by 42.4% to GH¢367.2 billion by October 2024, a notable improvement from the 3.2% growth recorded in October 2023. Solvency indicators showed progress, with the capital adequacy ratio (including reliefs) increasing to 11.1% (14.2%) from 7.3% (13.4%) in October 2023.

However, credit risks persist, as the NPL ratio rose to 22.7% from 18.3% over the same period, emphasizing the need for further measures to stabilize the sector and manage credit risks effectively.