The Governor of the Bank of Ghana (BoG), Dr Johnson Pandit Asiama, has revealed that the Domestic Debt Exchange Programme (DDEP) severely strained the balance sheets of banks in the programme’s early stages, eroding capital buffers and constraining lending within the financial sector. 

He explained that the programme, though necessary to restore the country’s debt sustainability, forced many financial institutions to adjust to reduced returns on government securities and rising non-performing loans.

Dr Asiama, however, stressed that ongoing recapitalisation efforts and strengthened regulatory oversight had helped the banking sector to recover gradually.

Addressing the Parliamentary Committee on Economy and Development in Parliament House in Accra yesterday, Dr Asiama stated that improving capital adequacy, declining non-performing loans and growing deposits now signalled renewed confidence and resilience within the sector.

“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.

Banking sector response

The Governor said banks had since taken steps to stabilise their operations and rebuild capital buffers following the shocks from the DDEP.

He explained that regulatory support and recapitalisation measures had helped financial institutions to maintain stability and restore confidence in the sector.

“Through recapitalisation efforts and close supervisory engagement, the banking system has strengthened considerably. Capital adequacy improved to 17.5 per cent, comfortably above the 13 per cent regulatory minimum.

“Asset quality has also improved.

The non-performing loan ratio declined from 21.8 per cent to 18.9 per cent, and banks now have a clear roadmap to reduce non-performing loans towards 10 per cent by end 2026,” the Governor said.

He said that banks were gradually regaining their capacity to support economic activities through lending and other financial services.

Despite the challenges, Dr Asiama said the central bank remained optimistic about the sector’s recovery and resilience.

“The banking sector demonstrated resilience, and with the ongoing recapitalisation efforts and prudent risk management by banks, we are confident that the industry would continue to recover and play its critical role in supporting economic growth,” he stated.

The Governor stated that the central bank had implemented a number of coordinated policy measures to restore macroeconomic stability and rebuild confidence in the financial system.

He explained that the Monetary Policy Committee had maintained a tight monetary policy stance to contain inflation and anchor expectations.

Policy settings, Dr Asiama said, had been kept sufficiently restrictive to ensure that inflation gradually returned to the central bank’s target band.

He said beyond monetary tightening, the BoG had also moved to address excess liquidity in the banking system, which had weakened the transmission of the policy rate into market interest rates.

“These measures were designed to ensure that liquidity conditions in the financial system aligned more closely with the policy stance, thereby strengthening the transmission of monetary policy to market interest rates and supporting the broader objective of restoring price stability,” he said.

Dr Asiama said the central bank had prioritised rebuilding Ghana’s external buffers as part of the broader macroeconomic stabilisation strategy.

He said international reserves had been strengthened through improved export earnings, remittance inflows and the Domestic Gold Purchase Programme.

He explained that the programme had significantly increased the country’s gold holdings, which rose from about 8.7 tonnes in 2021 to more than 40 tonnes by October 2025.

However, rising global gold prices also increased the share of gold in the country’s reserves to about 42 per cent, creating a concentration risk.

Portfolio rebalancing

To address this, Dr Asiama said the central bank undertook a measured portfolio rebalancing by converting part of its gold holdings into foreign exchange assets in order to maintain a more diversified reserve structure.

“This action did not represent a loss of Ghana’s national assets.

The gold was simply converted into foreign exchange assets, which remained fully part of Ghana’s international reserves and continued to support the country’s external stability,” he explained.

He added that the policy measures implemented by the central bank had begun to yield positive results, including a sharp decline in inflation, improved exchange rate stability and stronger international reserves.