A monetary policy report released by the Bank of Ghana (BoG) reveals that lending to the private sector experienced a notable rise in February 2023, reaching GH¢65.50 billion.

This marks a substantial increase from the previous year, where lending stood at GH¢50.59 billion in February 2022.

‘’Outstanding credit to the private sector at the end of February 2023 was GH¢65.50 billion, compared with GH¢50.59 billion recorded in February 2022. In real terms, private sector credit contracted by 15.3 percent compared with 1.2 percent contraction recorded over the same comparative period,’’ the report said.

In line with the observations made by the Central Bank, lending to the private sector in February 2023 exhibited several factors contributing to its growth. The increase was attributed to portfolio reallocation by banks and the revaluation of foreign currency denominated credit due to exchange rate fluctuations.

The service sector, which experienced significant growth of 10.1 percent in the first quarter, received the highest share of credit at 30 percent among various sub-sectors within the private sector. The Central Bank highlighted that credit allocation remained concentrated in sectors such as services, import trade, manufacturing, mining and quarrying, and agriculture, forestry, and fisheries.

Compared to the same period in 2022, private sector credit constituted a larger proportion, accounting for 86.4 percent of the overall credit flow to both private and public institutions in February 2023, compared to 84.9 percent previously.

Fitch Solutions, in its assessment of the Ghanaian banking sector, echoed the Central Bank's findings and predicted that banks would focus more on lending to the private sector rather than the public sector due to the fiscal consolidation program under the International Monetary Fund (IMF).

The rating agency further anticipated that banks would adopt a more selective approach, particularly regarding sub-sectors with high non-performing loan ratios.

It agreed with the Central Bank’s findings on lending to households and firms as demand for loans by firms and households experienced a net decline in the same month.

While the Central Bank blamed the decline in lending to households to a net decline in the demand for mortgages, the rating agency blamed it on rising interest rates.