CalBank Banking Sector Overview & Competitor Benchmarking
Prevailing Macroeconomic Headwinds | Impacts on Ghana's financial sector
Globally, major economic declines, persistent inflation and uncertainties emanating from Russian-Ukraine war & China's economic slowdown
Adverse changes to local economic conditions have led to tight financing conditions in domestic financial markets.
Inflation rate
01
Growth in interest rates
March
2023
March
2022
Y-o-Y
Percentage
Points
45.00%
19.40% 25.6
Interest rate 91-day bill
18.88%
12.82% 6.06
03
Monetary policy rate
29.50%
17.00%
12.5
Ghana reference rate¹
25.76%
14.50% 11.26
Public debt (USD bn)²
58.20
43.90 32.57%
Given the upside risks to inflation, impending legislative approval of new tax
measures and the excess liquidity support to counter the shocks from the
DDEP, the MPC moved to increase the MPR to 29.5%
02 Tightening MPR and liquidity management
Increases in cost of funds coupled with tightening monetary policy translating
into higher lending rates to borrowers with concomitant impact on NPLs in the
near term. Also, squeezing liquidity from banks which could be deployed into
revenue generating vehicles
Economic downgrade
The S&P and Fitch downgrades led to a loss of investor confidence in Ghana
and made the Ghanaian market unattractive to foreign money market
managers. Expected successful IMF bailout by HY 2023 will provide some
policy credibility and restore investor confidence.
04 Rising inflation and currency depreciation
The Bank of Ghana revised its end-2023 inflation forecast to 28.5%, up from
the previous forecast of 25%, underscoring the need for the policy rate hike to
re-align with the new 12-months outlook on inflation.
Reported "Haircut" on GOG papers
Preliminary assessment of the impact of the DDEP on the banking sector,
points to significant losses on account of impairment of banks' holdings in GoG
bonds. The impact of the DDEP is moderated by the timely introduction of
regulatory reliefs by the Bank of Ghana.
Fiscal deficit (% of GDP)³
-8.10%
-9.20% |(1.10)
05
Source: BoG Summary of Economic and Financial Data - July 2022
1As at April 2023
2As at November 2022
3As at December 2022
7
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