The International Monetary Fund has indicated that the continued progress in addressing Ghana's financial sector challenges is essential to ringfence financial sector stability.

In its second review of the Extended Credit Facility programme, the IMF said the Bank of Ghana has appropriately escalated punitive remedial and/or corrective measures to ensure that banks implement their recapitalization plans, and as such the Ministry of Finance has started to recapitalize state-owned banks.

“Continued progress on these fronts is of the essence”, it added.

Given the rise of Non-Performing Loans observed over the last year, the IMF advised that it is critical to ensure adequate reporting and provisioning of NPLs through enhanced supervision.

“Addressing problems at Specialised Deposit Taking institutions and Non-Banking Financial Institutions is important but should be done in a cost-effective way. Looking ahead, the authorities should ensure the timely and full implementation of the recently approved strategy to resolve NIB’s financial and operational problems and use some of the lessons from NIB to address effectively long-term structural weaknesses in other state-owned banks, including through better enforcement of regulations and governance”, it added.

Banking industry NPLs surged to 24.1%

The banking sector’s Non-Performing Loans (NPLs) ratio rose to 24.1% in June 2024, an increase from 18.7% in June 2023.

As reported by the Bank of Ghana, even with advancements in the banking sector’s performance, heightened credit risk threatens the sector’s recovery.

Nevertheless, the Bank of Ghana maintains that the steady growth in profits, adherence to recapitalization strategies, and implementation of stringent credit underwriting standards will support banks in achieving complete recovery and resilience.