The Bank of Ghana’s recent monetary policy report highlighted a significant increase in lending to the private sector in February 2023. The outstanding credit to the private sector reached GH¢65.50 billion, compared to GH¢50.59 billion in February 2022. However, in real terms, private sector credit contracted by 15.3 percent, reflecting portfolio reallocation by banks and exchange rate revaluation on foreign currency denominated credit.
Among the various sub-sectors in the private sector, the service sector received the highest credit share of 30 percent, in line with its strong growth rate of 10.1 percent in the first quarter. The report also noted that credit flow remained concentrated in sectors such as services, import trade, manufacturing, mining and quarrying, and agriculture, forestry, and fisheries.
Private sector credit accounted for 86.4 percent of the overall credit flow to both private and public institutions in February 2023, compared to 84.9 percent in the same period of 2022. This trend aligns with Fitch Solutions’ assessment of the Ghanaian banking sector, which predicts that banks will focus more on lending to the private sector rather than the public sector due to the fiscal consolidation program under the International Monetary Fund (IMF).
However, Fitch Solutions also expects banks to be selective in their lending activities, particularly to subsectors with high non-performing loans ratios. The agency agrees with the Central Bank’s findings that lending to households and firms experienced a net decline, with the Central Bank attributing it to a decrease in demand for mortgages and the rating agency attributing it to rising interest rates.
