DDEP strained banks but sector is gradually recovering – BoG Governor

The Governor of the Bank of Ghana, Johnson Pandit Asiama, has disclosed that the Domestic Debt Exchange Programme (DDEP) placed significant pressure on the balance sheets of banks during its early implementation, weakening capital buffers and limiting the sector’s ability to extend credit.

Speaking before the Parliamentary Committee on Economy and Development at Parliament House, Accra, Dr Asiama explained that although the programme was necessary to restore the country’s debt sustainability, it forced banks to adjust to lower returns on government securities and rising non-performing loans.

Despite the initial strain, he noted that recapitalisation efforts and stronger regulatory supervision have helped the financial sector gradually regain stability.

“The banking system entered 2025 still adjusting to the effects of the DDEP, but through close supervisory engagement and recapitalisation, the system has strengthened considerably,” he said.

According to the Governor, recent indicators show signs of recovery and renewed confidence within the sector. He pointed out that capital adequacy in the banking industry has improved to 17.5 per cent, which is comfortably above the 13 per cent regulatory minimum.

He also revealed that the non-performing loan ratio has declined from 21.8 per cent to 18.9 per cent, with banks working toward a target of 10 per cent by the end of 2026.

Dr Asiama said the gradual improvement means banks are slowly regaining their ability to support economic growth through lending and financial services.

“The banking sector demonstrated resilience, and with ongoing recapitalisation efforts and prudent risk management by banks, we are confident the industry will continue to recover and support economic growth,” he stated.

Monetary Measures to Stabilise the Economy

The Governor further explained that the central bank has introduced several policy interventions aimed at restoring macroeconomic stability and strengthening confidence in the financial system.

He noted that the Monetary Policy Committee has maintained a tight monetary policy stance to help curb inflation and stabilise economic expectations.

According to him, policy settings have remained sufficiently restrictive to guide inflation back toward the central bank’s target range.

In addition, the central bank has taken steps to manage excess liquidity within the banking system, which previously weakened the effectiveness of policy rate adjustments on market interest rates.

“These measures are designed to ensure liquidity conditions align with the policy stance and strengthen the transmission of monetary policy to market interest rates,” Dr Asiama explained.

Boosting International Reserves

Dr Asiama also highlighted efforts to rebuild Ghana’s external buffers as part of the broader economic stabilisation agenda.

He said the country’s international reserves have improved through stronger export earnings, increased remittances and the central bank’s Domestic Gold Purchase Programme.

Under the initiative, Ghana’s gold reserves increased significantly from about 8.7 tonnes in 2021 to more than 40 tonnes by October 2025.

However, he cautioned that the surge in global gold prices had pushed the share of gold in the country’s reserves to around 42 per cent, creating a concentration risk.

To manage this, the central bank undertook a strategic portfolio rebalancing, converting part of the gold holdings into foreign exchange assets to maintain a more diversified reserve structure.

“This action does not represent a loss of Ghana’s national assets. The gold was simply converted into foreign exchange assets, which remain part of Ghana’s international reserves,” he clarified.

Dr Asiama concluded that the central bank’s policy measures are already producing results, citing falling inflation, improved exchange rate stability and stronger reserves as signs that the economy is gradually stabilising.