Ghana’s new dawn or Déjà Vu? A mid-year economic review of 2025

Ghana’s political reset in 2025 has coincided with an unmistakable economic rebound. Inflation is easing, the Ghana Cedi has steadied, business activity is picking up and this grants the new administration its first real chance to rewrite the country’s stop-start growth story. The rebound looks even sharper against peers, with Nigeria struggling with inflation above 20% and Kenya with recurring fiscal strains. Ghana’s mix of forex interventions, rising gold and cocoa earnings and a recovering Composite Index of Economic Activity puts it closer to Côte d’Ivoire’s steady post-pandemic climb.

The economic momentum is supported by hard numbers, pointed sharply upwards and, at last, appear to be smiling. In the first half of the year, headline inflation tumbled from 23.8% (December, 2024) to 13.7% (June, 2025), the Ghana Cedi surged by more than 40% against the US Dollar and GDP growth accelerated to 5.3% in Quarter 1 (Q1). International reserves have climbed to their highest level in 15 years, delivering approximately 4.8 months of imports cover even as public debt has fallen from GH¢726.7 billion to GH¢613.0 billion. The banking sector’s capital adequacy ratio has strengthened to 14.4% and food inflation, though still elevated at 15.1% in July, is well below crisis peaks. These achievements are an indication of prudent fiscal management, targeted monetary policy and strategic interventions in key sectors.

Such early gains have not occurred by chance. Coordinated policy execution, renewed investor confidence and decisive measures in both the fiscal and monetary arenas have laid a strong foundation for recovery. Unlike some previous transitions, where initial optimism faded, the current rebound stands out for its sheer speed and scale.

However, experienced analysts may feel a twinge of déjà vu. History has shown that early gains can fade if structural reforms stall or fiscal discipline slips in later years. For President Mahama’s administration, the challenge and opportunity are to sustain these advances beyond the honeymoon phase, breaking the cycle of short-lived recoveries. Doing so will require resisting the temptation to reset priorities midstream for short-term political wins and instead sustaining the agenda in reforms that outlast the electoral cycle.

This review examines ten key macroeconomic and banking indicators, which metrics provide a panoramic view of how far the economy has come since the turbulence of recent years and where the next phase of the path will be won or lost.

Inflation

Inflation, once the most visible sign of economic stress in Ghana, has eased dramatically in 2025. Headline inflation fell to 12.1% year-on-year (YoY) in July, the lowest level since October, 2021. This represents a sharp drop from 23.8% in late 2024 and 18.4% as recently as May, 2025. The cooling trend has been powered by falling fuel and transport costs, lower food prices and a stronger Ghana Cedi reducing imported inflationary pressures. Food inflation remains above headline levels but has retreated from the crisis high of 2022/2023.

This is a marked departure from the early years of previous first-term administrations such as the Kufuor and Mahama (v1) governments, when inflation often spiked in the double digits before stabilisation measures took hold. The present disinflationary phase gives the Bank of Ghana (BoG) room to consider interest rate cuts, potentially easing borrowing costs and stimulating investment, provided stability is maintained.

Composite Index of Economic Activity (CIEA)

Ghana’s Composite Index of Economic Activity (CIEA), which is a monthly gauge of business and consumer activity, points to a much stronger recovery in 2025. Covering trade, company sales, tourist numbers, port traffic, bank lending, electricity use, cement sales, private sector credit and VAT receipts, the index plunged in the year 2020 at the height of the pandemic.

By May, 2025, CIEA was up 4.4% in real terms compared to a year earlier, which is an improvement from 3.4% in May, 2024. Also, in March, 2025, activity rose 2.3% YoY, more than double the 1.0% gain in March, 2024. This is in stark contrast to 2020, when contractions of up to -4% were recorded.

These stronger CIEA readings are consistent with Ghana’s broader economic growth of 5.3% in Q1 2025, up from 4.9% in Q1 2024, well above the long-term average since year 2000. The key drivers are expansions in agriculture, services and construction, supported by easing inflation, a stable exchange rate and stronger foreign reserves.

Monetary Policy Rate

The BoG’s policy rate, which stood at 28% earlier in 2025, was slashed by a historic 300 basis points in July, bringing it down to 25%, the steepest cut in its history. This (unarguably) decisive move was backed by a sharp disinflationary trend, with inflation easing to 13.7% in June from 18.4% in May, the lowest level since December, 2021.

Looking ahead, market watchers expect further easing. Analysts at Fitch Solutions forecast an additional reduction to 23% by the end of 2025 and 20% by the end of 2026, a projection validated by the BoG Governor’s own admission that there is room for further policy cuts if macroeconomic stability persists.

The transmission of this monetary stance is already becoming evident as commercial banks are revising lending rates downward, easing financing pressures on businesses and households. This renewed credit momentum is filtering into the real economy particularly agriculture, services and small enterprise sectors that are highly rate-sensitive.

Exchange Rate Performance

Perhaps the most striking development in 2025 has been the Ghana Cedi’s rebound. Earlier in the year, the Ghana Cedi traded as weakly as the high GH¢15s, levels last seen during past crises. By mid-June, it had recovered to about GH¢10.3 per USD, representing an appreciation of over 40%, one of the sharpest in the region.

This rebound has been propelled in a powerful mix of macroeconomic measures and external inflows. A strong external buffer, tight monetary policy and improved market sentiment played central roles as detailed as follows;

Firstly, gross international reserves rose to about US$11.12 billion by June, raising import cover to approximately 4.8 months, significantly strengthening Ghana’s ability to weather external shocks.

Also, the Bank of Ghana’s regular interbank interventions including a US$490 million forex injection in April, 2025 helped to manage the exchange rate effectively. At the same time, the GoldBod initiative, under which the government purchases all gold from artisanal miners and about 20% of large-scale miners’ monthly production in Ghana Cedi rather than US Dollars for export, paired with high global gold and cocoa prices, ensured steady FX inflows, supporting the Ghana Cedi’s stability.

Moreover, the exercise of tight monetary policy with the policy rate held at 28% through mid-2025, combined with fiscal reforms and debt restructuring, strengthened confidence in both the Ghana Cedi and Ghana’s economic outlook.

Fiscal Balance

The fiscal deficit for 2025 is projected at 3.9% of GDP which is an improvement from the 4.1% recorded in 2024 and well below the double-digit gaps seen during the COVID-19 years. This narrowing is an indication of disciplined expenditure management, improved tax compliance and stronger-than-expected receipts from the energy sector. More importantly, too, the government’s target of maintaining a primary surplus of 1.5% of GDP signals a shift towards fiscal orthodoxy, which is something that has not always been sustained in the early terms of past administrations.

Historically also, similar fiscal gains in the mid-2000s and mid-2010s were often reversed by election-year spending surges, leading to inflationary pressures and exchange rate instability. The key challenge now will be to sustain these gains beyond the mid-year review period while safeguarding growth-enhancing capital expenditures.

From a theoretical perspective, this trend is consistent with the fiscal sustainability framework, which posits that maintaining a primary surplus is essential for stabilizing public debt-to-GDP ratios. It also resonates with Ricardian Equivalence to some extent, in that credible fiscal consolidation can improve market confidence, lowering sovereign risk premiums and stimulating private investment. In the context of Ghana, the credibility of this fiscal path will hinge on resisting procyclical spending in the run-up to 2026 and embedding structural reforms that enhance revenue resilience.

Public Debt-to-GDP Ratio

Ghana has achieved a spectacular drop in public debt from a staggering 85% to 89% of GDP in 2022 to just 43.8% by June, 2025, down from 61.8% at the end of 2024. Even though the breakdowns show domestic and external obligations tallying to 22.3% and 29.1%, respectively, valuation differences explain why they don’t reconcile perfectly with the headline figure.

Compared to the debt overhang that burdened earlier governments particularly during the pre-HIPC years, the current ratios suggest more fiscal breathing space. However, Ghana’s history of external shocks, from commodity price swings to global financial turbulence, justifies the need for vigilance.

Economic Growth Rate
At 5.3% YoY in Q1 2025, Ghana’s GDP growth is outpacing the 2024 performance of 4.9% YoY and beating earlier projections. The non-oil economy, led by agriculture and services remains the main driver of expansion, effectively counterbalancing the ongoing drag from oil and gas. Agriculture has been propped up by favourable weather and higher cocoa output, even as services especially wholesale, retail and information and communications technology (ICT) continue to provide strong momentum, according to the Bank of Ghana’s 2025 Monetary Policy Report.

From a theoretical perspective therefore, this pattern is consistent with the structural transformation hypothesis, which posits that sustainable long-run growth requires a shift from narrow, resource-driven expansion to a broader, diversified base across productive sectors. Ghana’s growth trend demonstrates this transition unlike the early 2010s, when GDP growth peaked above 14% in 2011 on the back of oil production. Today’s economy is less dependent on extractives. This diversification strengthens resilience by reducing vulnerability to sector-specific shocks.

Nonetheless, the current growth figure of 5.3% YoY remains below the 6.5% average recorded during President Akufo-Addo’s first term (2017 to 2020), when momentum was boosted by post-oil boom expansion. However, the present path appears steadier and more balanced, supporting long-run stability over short-lived cyclical surges.

Credit Growth to the Private Sector

Private sector credit in Ghana remains an indispensable fault line in the country’s growth narrative. As of 2023, the credit-to-GDP ratio stood at just 8.65%, less than half the 16% level seen in 2017 and well below regional comparators. This collapse in credit penetration shows the lingering effects of post-recapitalisation retrenchment, legacy non-performing loans (NPLs) burden and tighter prudential oversight.

However, the tide is slowly turning. The rebound in private-sector credit is striking. In nominal terms, credit surged by 26.9% YoY in February, 2025, up sharply from just 5.1% a year earlier. Even more telling, real credit growth turned positive at 3.1%, reversing February, 2024’s steep -14.7% contraction. Such recovery shows improving balance sheets, a restoration of confidence and the early stirrings of a more supportive financial environment.

The structural low in credit penetration is an indication that Ghana’s financial system is still healing. According to World Bank data (FRED, GFDD private-credit series), private credit-to-GDP declined from 12.9% in 2017 to 9.9% in 2020, before sliding further. Even with the 2025 rebound, credit supply remains thin, constraining the full growth potential of the economy.

Ghana’s credit story is therefore at an inflection point where policy easing and macroeconomic stability may ignite a financial accelerator effect, but the pace of recovery will hinge on whether banks can sustainably balance prudence with risk appetite.

Non-Performing Loans (NPL) Ratio

Ghana’s banking sector is showing tentative progress in asset quality, though vulnerabilities remain pronounced. As of April, 2025, the Non-Performing Loans (NPLs) ratio declined to 23.6%, down from 25.7% in April, 2024. This marks a continuation of the downward trend from a peak above 26% in early 2024, showing stronger loan growth relative to the rise in problem loans. Still though, the figure is more than double the 10% ceiling the BoG targets by December, 2026.

A more encouraging signal lies in the adjusted NPL ratio which excludes fully provisioned loans, now at 9.0%, improved from 11.1% in April, 2024. This suggests banks are increasingly absorbing expected losses and strengthening their capital buffers. This notwithstanding, the absolute stock of NPLs climbed to GH¢21.7 billion, up 8.7% from GH¢20.0 billion a year earlier, buttressing the fact that while the ratios are improving, the problem in nominal terms is far from solved.

The private sector dominates Ghana’s NPL burden, accounting for 93.4% of the total in April, 2025, up from 91.0% the previous year. By contrast, the public sector’s share eased to 6.6%, demonstrating relative improvements in state-related loan performance.

Disaggregated sectoral figures paint a mixed picture as shown in the lines below;

Firstly, agriculture, forestry and fishing remain the most distressed, with NPLs surging to 62.1% from 58.7%.

Also, transportation, storage and communications also worsened, climbing to 53.9% from 49.0%.

Encouragingly, construction saw a sharp turnaround, with NPLs falling to 30.3% from 41.3%, while mining and quarrying improved to 9.8%, down from 14.4%, the lowest across major sectors.

Notwithstanding the modest gains, Ghana’s NPL ratio of 23.6% is still extreme compared to regional peers, where most West African and Sub-Saharan African banking systems record NPL levels between 10% to 15%. Elevated NPLs are not just a banking-sector problem but they transmit broader macroeconomic consequences.

From the lens of the financial accelerator theory, high problem loan ratios erode banks’ net worth and risk-bearing capacity, amplifying shocks in the real economy. With capital locked in non-performing assets, banks raise risk premium and curtail credit supply, creating a feedback loop that restrains private sector investment and growth.

Capital Adequacy Ratio

As of mid-2025, Ghana’s banking sector maintains an aggregate Capital Adequacy Ratio (CAR) of about 14.3% to 14.4%. This sits comfortably above the 13% regulatory minimum (temporarily eased to 10% under forbearance during the post-crisis clean-up), showing a banking sector with materially stronger capitalization than in the turbulent pre-year 2017 era.

The progress is striking when viewed against history. Before the 2017 financial sector reforms and the more recent Domestic Debt Exchange Programme (DDEP), many banks struggled to meet even the regulatory floor, with CARs frequently slipping below 13%. Weak capital positions were a key trigger for systemic distress and the wave of bank failures during the clean-up.

By contrast, today’s 14% level represents a marked turnaround. The trend line shown in the lines below proves this shift;

1. In the year 2022, CAR plunged to about 7.3%, showing post-DDEP valuation losses.
2. In late 2023, recovery began, with CAR improving to around 11.1%, signalling the start of stabilization.
3. From 2024 to early 2025, CAR rose to and held steady at 14.0% to 14.4%, aided by recapitalization measures, regulatory reliefs and gradual profitability recovery.

This upward trend has strengthened banks’ buffers against shocks. However, regulators and analysts alike caution that capital strength alone is insufficient. Resilience still hinges on tackling high non-performing loans (23.6% as of April, 2025) and ensuring banks generate sustainable profits to build capital organically, rather than relying on regulatory waivers or forced recapitalizations.

The foregoing analysis reveals that key macroeconomic fundamentals have strengthened markedly, buoyed by sound fiscal oversight, a stabilized currency and a progressively healthier banking sector. The early gains of this administration, though reminiscent of previous first-term surges, are being achieved in a far more complex global and domestic environment, making the government’s and Bank of Ghana’s achievements all the more noteworthy.

Ultimately, if 2025 proves to be Ghana’s New Dawn or a replay of Déjà Vu will hinge on the coherence, consistency and intensity of execution beyond this mid-year checkpoint. The first half of the year provides tangible evidence that the current administration has both the opportunity and the momentum to break the historical cycle of gains followed by reversals. With steadfast political will and pragmatic economic stewardship, Ghana can chart a more resilient and inclusive path, one that consolidates its hard-won stability into lasting prosperity.

References

Primary Authoritative Sources

1. Bank of Ghana. (2025, July). Monetary Policy Committee Press Release – July 2025. Accra: Bank of Ghana. https://www.bog.gov.gh
2. Bank of Ghana. (2024, December). Financial Stability Review 2024. Accra: Bank of Ghana.
3. Bank of Ghana. (n.d.). Real Sector Indicators. Bank of Ghana. https://www.bog.gov.gh/economic-data/real-sector/
4. Federal Reserve Bank of St. Louis. (2024). Private credit by deposit money banks to GDP for Ghana (DDDI01GHA156NWDB) [Data set]. World Bank, Global Financial Development Database. FRED. https://fred.stlouisfed.org/series/DDDI01GHA156NWDB
5. Fitch Solutions. (2025, March). Ghana Banking & Financial Services Report Q2 2025. London: Fitch Solutions Group Limited.
6. International Monetary Fund. (2025, May). Ghana: Fourth Review under the Extended Credit Facility Arrangement. IMF Country Report No. 25/112. Washington, DC: IMF.
7. International Monetary Fund. (2025). Ghana: Fourth Review Under the Arrangement Under the Extended Credit Facility. IMF Staff Country Reports, 2025(175). https://doi.org/10.5089/9798229016827.002
8. Ministry of Finance, Ghana. (2025). 2025 Budget Statement and Economic Policy. Accra: Ministry of Finance. https://mofep.gov.gh/sites/default/files/budget-statements/2025-Budget-Statement-and-Economic-Policy.pdf
9. World Bank. (2024, October). Ghana Economic Update: Strengthening Resilience for Sustainable Recovery. Washington, DC: World Bank.
10. World Bank. (2025). Ghana Public Finance Review: Building the Foundations for a Resilient and Equitable Fiscal Policy. Washington, DC: World Bank. https://hdl.handle.net/10986/42798

Supporting / Media References

1. GhanaWeb. (2025, March 10). Ghana’s banking sector capital adequacy ratio improves to 14.4% – BoG. GhanaWeb. https://www.ghanaweb.com
2. JoyOnline. (2025, April 3). Banks show stronger capital buffers as CAR rises to 14.3%. MyJoyOnline. https://www.myjoyonline.com

By Dr. Akwasi Agyeman Britwum

Economist, Chartered Accountant, Banker

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