Nelson Cudjoe Kuagbedzi (BSc. MPhil, MBA, CA, MCIT, ACIB, ACI, LLB)
Business News
Ghana entered 2025 in a state of fragile stabilisation. The economy had endured one of the most turbulent periods in its recent history, and although early signs of recovery were visible, the underlying conditions remained deeply stressed.
Headline inflation stood at 23.8 per cent at end-2024; well above the Central Banks’ target band of 8±2 per cent, while the Ghana cedi had depreciated by nearly 20 per cent, feeding imported inflation and undermining business and investor confidence.
The starting point: A fragile and weak economy
Fiscal pressures compounded the challenge. The public debt-to-GDP ratio stood at 61.8 per cent, the fiscal deficit at 7.9 per cent of the Gross Domestic Product (GDP), current account balance stood at $1.5 billion (1.8 per cent of GDP) and lending rates exceeded 30 per cent levels that severely constrained private sector credit demand and investment.
Ghana’s gross international reserves, though covering 4.1 months of imports at US$9.1 billion, provided a narrowing buffer against external shocks.
The starting conditions shaped not just the economy, but the Bank’s own balance sheet and the difficulty of its mandate.
The bank absorbed significant collateral damage from the Domestic Debt Exchange Programme (DDEP).
The debt restructuring imposed a 50 per cent haircut on the bank’s holdings of government securities, directly reducing the income-generating capacity of its asset portfolio.
Year on year the bank continues to lose about 13 billion cedis as a result of the Domestic Debt Exchange programme.
Rising yields further eroded the market value of existing holdings, while a large overhang of excess liquidity in the banking system blunted the transmission of monetary policy into market rates.
The bank thus entered 2025 with a clear but demanding mandate: bring inflation down decisively, restore confidence in the exchange rate, and rebuild the foundations for durable stability.
I. The policy response: A coordinated, data driven and well thought through response
The bank’s response was structured around four interconnected pillars, each addressing a specific vulnerability in the macroeconomic and financial landscape.
Tight monetary stance and liquidity management;
The policy rate was held at restrictively high levels to force inflation back toward target and restore institutional credibility. As the disinflation path became well-anchored in the data, the Bank began a calibrated easing cycle. In parallel, open market operations (OMO) were significantly intensified to drain excess liquidity and restore the transmission of monetary policy signals into market interest rates. This was not costless: OMO interest expenses roughly doubled from GHS 8.6 billion in 2024 to GHS 16.7 billion in 2025 – a direct, audited cost of fighting inflation. The inevitable cost of stabilising the economy.
External buffers and exchange rate reform;
The Bank scaled its Domestic Gold Purchase Programme (DGPP), refining and exporting gold to accumulate foreign exchange reserves. A new FX framework was introduced in November 2025, and the reserve portfolio was rebalanced to improve diversification. In February 2026, Parliament formalised this reserve strategy by passing Ghana’s National Reserve Accumulation Programme (GANRAP), enshrining the gold accumulation approach as national law and limiting central bank financing of the programme going forward.
Financial sector resilience;
Supervisory effort focused on ensuring that banks absorbed shocks rather than transmitted them. Capital gaps were closed, non-performing loan (NPL) timelines were enforced, and governance standards were tightened across the system. As at the end of 2025, the capital adequacy ratio improved from 14 per cent in 2024 to 15 per cent well above the Basel requirement of 13 per cent whilst NPLs moved from 22 per cent to about 18.9 per cent. The banking sector was resilient, highly liquid with quality assets ready to fuel the economy.
Key regulatory infrastructure was also strengthened;
In 2025, several critical infrastructure milestones were achieved to strengthen the financial ecosystem. The National Payment Systems Strategy 2025–2029 was completed, establishing a five-year roadmap focused on interoperability, inclusion, and the advancement of digital payments. Alongside this, a Systemically Important Payments framework was introduced, providing clear criteria for the oversight of payments infrastructure deemed critical to national stability. Further reinforcing the regulatory landscape, new International Money Transfer Operators and agent banking guidelines were rolled out to enable stronger oversight of remittance flows exceeding US$4 billion annually, while also expanding financial access across underserved segments. Rounding out the year’s achievements, innovation was actively supported through the supervised testing of FinTech solutions, and a landmark regulatory step was taken with the passage of the VASP Act, signaling a decisive move toward formal oversight of virtual asset service providers.
II. The results: Stabilisation delivered and growth about to take off
The policy measures delivered results that, by any measure, constitute a remarkable macroeconomic turnaround. By December 2025, headline inflation had fallen to 5.4 per cent down from 23.8 per cent a year earlier, one of the steepest disinflation trajectories recorded in recent emerging market history. The Ghana cedi appreciated by more than 40 per cent over the course of the year, earning the distinction of being the world’s best-performing currency in 2025. Gross international reserves climbed to US$13.8 billion, equivalent to 5.7 months of import cover, up from US$9.1 billion at end-2024.
Fiscal consolidation reinforced these gains. The public debt-to-GDP ratio declined sharply to 45.3 per cent; down from 61.8 per cent a year ago — while the fiscal deficit narrowed to 1.0 per cent of GDP. The current account balance improved dramatically, from US$1.5 billion in 2024 to US$9.4 billion (8.2 per cent of GDP) in 2025. Real GDP growth accelerated modestly to 6.0 per cent, up from 5.8 per cent, with non-oil GDP growth particularly strong – a signal that the recovery was broadening beyond commodity dependence. Consumer and business confidence both reached record highs.
The banking sector emerged from the year in a materially stronger position. The industry capital adequacy ratio (CAR) improved to 17.8 per cent, comfortably above the 13.0 per cent regulatory minimum, while the NPL ratio declined from 21.8 per cent to 18.9 per cent. A clear roadmap was established to reduce NPLs to 10 per cent by end-2026. Total banking sector assets grew 21.5 per cent to GH₵ 447 billion, gross loans rose 16.2 per cent to GH₵111 billion, and deposits expanded 17.8 per cent to GH₵325 billion. The number of banks operating below the minimum CAR fell from 11 to 5.
III. The financial cost: The accounting counterpart of policy
Central banks frequently incur financial costs when implementing policies necessary to restore macroeconomic stability. The Bank of Ghana’s 2025 financial results reflect precisely this dynamic: the economic gains achieved for households, businesses, and government carried corresponding financial consequences for the institution that engineered them.
DDEP income drag
Following the DDEP, government securities held by the bank carried significantly lower coupon rates. The estimated foregone income was approximately GH₵13.4 billion in 2024 and GH₵13.0 billion in 2025; a cumulative structural drag of roughly GH₵26.4 billion over two years. This is income the Bank did not receive, not cash that left the Bank.
OMO sterilisation costs
Absorbing the excess liquidity overhang required active sterilization through OMO bill issuance. The interest expense on these operations rose from GH₵8.6 billion in 2024 to GH₵16.7 billion in 2025. As disinflation is sustained and the policy rate normalises, this cost is expected to naturally diminish.
Gold programme accounting effect
Under the DGPP, gold was purchased locally from miners in cedis at prevailing market rates and recorded on the Bank’s books at the official interbank rate. The gap between these two rates at the moment of purchase (not a cash outflow, but an accounting differential) constituted the largest component of gold-related costs. In 2025, rapid cedi appreciation temporarily widened this gap. The programme nonetheless succeeded in building the reserve infrastructure Ghana now owns through the Ghana Accelerated National Reserve Accumulation Policy (GANRAP).
Foreign currency revaluation
The Bank holds a substantial share of its assets in SDRs, foreign securities, and monetary gold. When the cedi strengthens, the cedi value of these foreign-denominated assets declines. This produced a negative Other Comprehensive Income (OCI) effect in 2025; the mirror image of the GH₵12.9 billion OCI gain recorded when the cedi weakened in 2024. The underlying reserve assets remain fully in place; this is a temporary accounting adjustment, not a loss of substance.
Critically, none of these financial effects impairs the Bank of Ghana’s ability to conduct monetary policy or fulfil its mandate. Its legal mandate is fully intact, its policy tools remain operational, the banking sector is stable, the reserve position is at a record, the IMF programme remains on track, and the most recent audit resulted in a clean and unqualified opinion.
IV. The outlook: Room built for an uncertain world
As of April 2026, the global environment has become materially more complex than at the start of the year. Evolving trade policies and restrictions are creating uncertainty for capital flows and international commerce.
Active regional conflicts have driven Brent crude above US$100 per barrel, a 33 per cent overshoot relative to the 2026 budget assumption of US$75, with direct transmission to domestic fuel costs through the Strait of Hormuz and Suez Canal.
Tighter global financing conditions have rendered risk appetite for frontier market assets less predictable, and key commodity prices are experiencing significant volatility in both directions.
Ghana’s position today, however, is one of genuine preparedness. Inflation reached 3.2 per cent in March 2026; the fifteenth consecutive monthly decline, with seven of sixteen regions now recording deflation.
The disinflation is geographically broad and deepening, providing the bank with real policy flexibility that was simply unavailable two years ago. Gross international reserves stood at US$14.5 billion as of March 2026, representing 5.8 months of import cover.
A trade surplus of US$3.7 billion was recorded in just the first two months of the year, and the Composite Index of Economic Activity showed year-on-year growth of 8.4 per cent in January 2026. The banking sector’s CAR improved further to 22.07 per cent by March 2026, well above the regulatory minimum.
The IMF programme is on track for completion in August 2026, with five of six reviews completed and all quantitative performance criteria met.
The sixth review commenced on 20 April 2026. Ghana enters this final stretch from a position of demonstrated programme ownership and markedly improved debt dynamics.
V. Priorities for 2026: Putting confidence to work
The Bank of Ghana’s strategic priorities for 2026 reflect a deliberate shift from crisis management to performance. Three interconnected themes define the agenda;
Monetary and market discipline
The March 2026 MPC cut the policy rate by 150 basis points to 14.0 per cent, a decision supported by four of six committee members, continuing the normalisation cycle earned through sustained disinflation. The 2026 focus is on completing this transition while building genuine depth in the fixed income market. GFIM trading volumes more than doubled in 2025; the objective now is to move from restored activity to a liquid secondary market with active institutional investor participation. The Bank will also manage the transition from a high-sterilisation liquidity environment to a more neutral stance without disrupting the signal clarity restored in 2025.
Banking sector quality and governance
The supervisory lens sharpens on credit quality over credit growth. Underwriting discipline, sectoral concentration, and cash-flow-based risk pricing will receive heightened scrutiny. The NPL reduction roadmap, targeting 10 per cent by end-2026, remains a firm prudential benchmark. Governance expectations for boards and senior management are rising, with deeper engagement on risk appetite, AML and CFT compliance, internal controls, and operational resilience. The easing rate environment also opens a window for intelligently restructuring legacy stress in viable credit relationships.
Digital infrastructure and regional integration
Payment’s infrastructure, settlement systems, digital rails, and data standards have become strategic assets rather than back-office considerations. Faster settlement, interoperable platforms, and stronger fraud controls directly affect the cost and competitiveness of the financial system. Innovation that lowers costs, expands access, and strengthens compliance will be prioritised, with a level playing field maintained between banks and non-banks. Ghana also aims to position itself as a reference point for regional financial integration under AfCFTA, with targeted exploration of innovative settlement instruments for intra-African trade.
The writer is a Tax and Finance Analyst
Source:
www.graphic.com.gh