Ghana’s economic recovery to drive banking sector turnaround – Fitch

The banking sector in Ghana is projected to experience significant improvements in the coming years as the country recovers from its debt challenges amidst an improving business environment.

According to Fitch Ratings, Ghanaian banks reported strong profits in 2023 and 2024, driven primarily by high yields on treasury bills.

These robust earnings have been instrumental in rebuilding the capital base of banks, which was severely eroded by losses from the Domestic Debt Exchange Programme (DDEP) in late 2022.

While certain accounting practices have masked the full impact of these losses, Fitch anticipates that sustained profitability will enable banks to restore their capital buffers by 2025.

This recovery is expected to position most banks to meet regulatory capital requirements once temporary relief measures expire.

The DDEP concluded in 2023, and Fitch forecasts the completion of Ghana’s external debt restructuring by early 2025.

A pivotal Eurobond exchange in October 2024 enhanced Ghana’s access to international financing and alleviated pressure on the cedi, prompting Fitch to upgrade the country’s credit rating.

Looking ahead to 2025, Fitch projects a more stable economic environment, characterised by stronger GDP growth, declining inflation, and a stabilised exchange rate.

These factors are expected to lower risks in the banking sector, paving the way for sustained growth and resilience in Ghana’s financial institutions.

This outlook signals a promising trajectory for the banking sector as it navigates the post-DDEP landscape and capitalises on Ghana’s broader economic recovery.