BoG Report: Ghana’s Private Sector Credit-to-GDP Gap Hits Record Low Despite Banking Sector Recovery

Accra, Ghana — Ghana’s private sector credit-to-GDP gap has fallen to an all-time low, according to the Bank of Ghana’s (BoG) September 2025 Monetary Policy Report, signalling a persistent slowdown in credit delivery to the real economy despite signs of recovery in the broader banking sector.

The credit-to-GDP gap, a key macro-financial risk indicator, measures how private sector credit growth compares to the size of the overall economy. A positive gap suggests that credit expansion is above the long-term trend, while a negative gap indicates that credit growth is lagging behind economic output.

According to the Central Bank, Ghana’s ratio remains negative and on a declining trajectory, underscoring the urgent need for policy interventions to boost private sector lending and stimulate productive investment.

“Ghana’s credit-to-GDP remains negative and declining, suggesting the need for measures to promote credit delivery to support the real economy,” the BoG noted.

Banking Sector Soundness Strengthens

Despite subdued private credit growth, the Banking Sector Soundness Index continues to improve, edging close to pre–Domestic Debt Exchange Programme (DDEP) levels.

The improvement, according to the BoG, reflects strong solvency positions, adequate liquidity, and healthy earnings performance across the industry.

However, the report cautioned that the non-performing loans (NPL) ratio, though slightly improved, remains elevated, presenting a lingering challenge for the sector’s stability.

The Central Bank expressed optimism that ongoing macroeconomic recovery and sustained efforts by banks to reduce NPLs will help enhance asset quality and further strengthen balance sheets in the coming quarters.

“The ongoing macroeconomic recovery, supported by banks’ implementation strategies to reduce non-performing loans, should help moderate the build-up of new NPLs and improve overall asset quality,” the report said.

Broader Context: Growth Amid Tight Credit

Analysts note that the persistence of a negative credit-to-GDP gap highlights a structural issue — the private sector’s limited access to affordable credit, even as Ghana’s financial sector stabilises post-DDEP.

With the Bank of Ghana maintaining a tight monetary stance to anchor inflation, lending rates remain relatively high, constraining credit flow to small and medium-sized enterprises (SMEs) — the backbone of Ghana’s economy.

The Central Bank has hinted at potential policy recalibration in 2026 to balance financial stability with growth support, as part of efforts to translate macro-level improvements into real-sector expansion.

Source: Accra Business News