Credit and discipline: Ghana’s new growth opportunity

Introduction

Ghana’s economy is entering a period of renewed opportunity. Stronger economic growth, lower inflation, improved external balances, easing interest rates, and a more resilient banking sector are creating conditions in which businesses can expand, households can plan, and investors can regain confidence.

Real GDP grew by 6.0 per cent in the second quarter of 2026, according to the Ghana Statistical Service. The Bank of Ghana has maintained the Monetary Policy Rate at 14.0 percent, while lending conditions have eased considerably. Average lending rates declined to 20.65 percent in June 2026 from 29.22 percent a year earlier.

Yet one warning remains important. Ghanaian banks wrote off GH¢1.23 billion in loan losses and depreciation in the first half of 2026, compared with GH¢893.0 million in the corresponding period of 2025, an increase of about 38 per cent.

The paradox is clear. Ghana has a stronger financial environment, but financial discipline must improve if this stability is to become sustainable prosperity.

Credit is returning to the economy

The banking sector is increasingly positioned to support economic recovery. Private sector credit grew by 41.2 per cent in June 2026, compared with 8.6 per cent a year earlier, while real private sector credit growth reached 34.1 per cent.

This creates opportunities for businesses to invest in machinery, technology, inventory, agriculture, manufacturing, construction and services. Households can also access finance for housing, education, transportation and productive activities.

However, credit is beneficial only when it generates sufficient economic value and cash flow to support repayment.

The NPL warning

The decline in the banking sector’s NPL ratio from 23.1 percent in June 2025 to 16.1 percent in June 2026 is encouraging. The adjusted NPL ratio, excluding fully provisioned loans, also fell from 8.5 percent to 4.6 per cent.

The improvement demonstrates that banking sector asset quality is recovering. However, the level of distressed credit remains significant, while the GH¢1.23 billion in loan losses shows that banks continue to absorb the consequences of earlier economic and financial pressures.

Loan delinquency is rarely caused by one factor.

1. Weak business cash flow: Businesses may have assets and sales but insufficient liquidity to meet loan obligations on time.
2. Poor financial planning: Borrowing without realistic projections of revenue, expenses and repayment capacity can quickly create distress.
3. High operating costs: Energy, transport, wages, rent and imported inputs can erode margins.
4. Market instability: Exchange rate movements, commodity prices and changing consumer demand can disrupt business plans.
5. Diversion of funds: Loans intended for productive investment can be diverted to consumption or unrelated activities.
6. Weak governance: Poor accounting, inadequate internal controls and weak management oversight increase financial risk.
7. Household over-borrowing: Families can become vulnerable when multiple loans are accumulated without sufficient income growth.

The cure is discipline

The solution is not to restrict credit. Ghana needs more productive credit. The solution is to ensure that borrowing is connected to productivity, cash flow and repayment capacity.

For households, five disciplines are essential.

1. Borrow according to income: A loan should reflect sustainable repayment capacity, not the maximum offered by a lender.
2. Prioritise productive expenditure: Borrowing for education, housing or income generating activities should receive greater priority than unnecessary consumption.
3. Maintain emergency savings: Financial reserves can prevent temporary shocks from becoming loan defaults.
4. Track all debts: Borrowers should monitor principal, interest, instalments and maturity dates.
5. Seek early restructuring: Borrowers facing temporary difficulties should engage lenders before arrears become severe.

Businesses must adopt similar discipline.

1. Strengthen financial reporting: Accurate accounts allow management and lenders to understand the true condition of the enterprise.
2. Match loans with cash flow: Repayment schedules should reflect when the business actually generates revenue.
3. Protect working capital: Long term loans should not routinely finance permanent operating losses.
4. Control costs: Revenue growth without cost discipline can still produce financial distress.
5. Stress test the business: Management should assess what happens if sales decline, interest rates rise or the cedi depreciates.

Stability creates opportunity

Ghana’s improving macroeconomic conditions provide a platform for a stronger private sector.

The Bank of Ghana reports that the country recorded a US$8.8 billion trade surplus in the first half of 2026, compared with US$5.8 billion during the same period of 2025. The current account surplus also increased to US$5.1 billion, while international reserves stood at US$12.9 billion, equivalent to five months of import cover.

These developments strengthen the economy’s capacity to withstand external shocks.

For government, stability can support infrastructure investment, revenue mobilisation and private sector development.

For businesses, lower financing costs and stronger credit growth can support expansion and employment.

For investors, improving macroeconomic conditions and banking sector resilience can strengthen confidence in Ghanaian assets.

For households, lower inflation and improved access to finance can support consumption, investment and wealth creation.

The banking sector itself has also strengthened. The Bank of Ghana reported that banks’ Capital Adequacy Ratio increased to 20.4 per cent in June 2026 from 10.6 per cent a year earlier.

Risks have not disappeared

Economic stability does not mean economic risk has disappeared.

Ghana remains exposed to global energy prices, geopolitical tensions, commodity prices and exchange rate movements. The Bank of Ghana has warned that higher crude oil prices, utility tariff adjustments and geopolitical developments could create renewed inflationary pressures.

Consequently, businesses and households must avoid assuming that favourable conditions will continue indefinitely.

What Ghana must do next

The country needs a coordinated financial discipline agenda.

1. Government must preserve fiscal discipline: Macroeconomic gains can quickly disappear if expenditure and debt pressures become uncontrolled.
2. Banks must strengthen credit assessment: Lending decisions should be based on genuine repayment capacity and productive potential.
3. Businesses must improve governance: Strong accounting, cost control and strategic planning should become standard practice.
4. Households must strengthen financial literacy: Responsible borrowing and saving should become part of everyday financial behaviour.
5. Investors must remain selective: Improved conditions should encourage investment, but not eliminate due diligence.
6. Regulators must protect stability: Strong supervision is essential as credit expansion accelerates.

Conclusion

Ghana’s economic recovery presents a rare opportunity to move from crisis management to sustainable growth. GDP growth of 6.0 per cent in the second quarter, significantly stronger private sector credit, declining NPL ratios, lower lending rates and improved external balances demonstrate that the economic environment has changed substantially.

But the GH¢1.23 billion in loan losses delivers an equally important lesson. Stability creates opportunity, but discipline determines whether that opportunity produces lasting prosperity.

Ghana therefore needs a new financial culture in which banks lend responsibly, businesses borrow productively, households spend prudently, and government protects macroeconomic stability.

The objective should not simply be more credit. It should be better credit, productive investment, stronger businesses, financially resilient households and sustainable national growth. That is how Ghana can convert its emerging macroeconomic stability into broad-based prosperity.

By Prof. Samuel Lartey

www.pefghana.org

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