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The Ghanaian banking sector is experiencing brighter prospects as solvency improves following the sovereign default, alongside reduced pressures from the operating environment. These developments align with the nearing completion of Ghana’s sovereign external debt restructuring and a stabilizing economy, according to a new special report by Fitch Ratings.
These trends highlight a positive outlook for the Ghanaian banking sector in 2025. Notably, the sector’s robust profits in 2023 and 2024 stemmed from high yields on Treasury bills, which have been instrumental in driving the recovery of capital post the Domestic Debt Exchange Programme (DDEP). The DDEP, launched in December 2022, inflicted significant losses on the sector.
Fitch noted, “The full capital impact continues to be masked by regulatory forbearance and accounting practices, but we anticipate strong profits to further aid capital recovery in 2025. This progress should ensure that the majority of banks comply with capital requirements by the end of 2025 when regulatory forbearance measures are set to expire.”
Ghana’s DDEP concluded in 2023, and Fitch expects the external debt restructuring to reach completion in early 2025. The successful Eurobond exchange in October 2024 has enhanced Ghana’s access to international financial markets and eased local-currency liquidity pressures. Consequently, Fitch upgraded Ghana’s Long-Term Local-Currency Issuer Default Rating to ‘CCC+’ from ‘CCC’.
Fitch predicts reduced macroeconomic volatility in 2025, forecasting increased real GDP growth, declining inflation rates, and a stabilizing exchange rate. These factors are expected to alleviate risks to the banking sector’s capital.
Despite solvency challenges arising from Ghana’s default, liquidity pressures have remained manageable, largely due to the sector’s reliance on domestic deposits rather than market and external debt. While foreign-currency liquidity coverage is anticipated to remain strong, local-currency liquidity will continue to depend on treasury bills.
These developments position Ghanaian banks for stronger performance in 2025 as the nation’s economic recovery gains momentum.
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