The International Monetary Fund has raised renewed concerns about the health of Ghana’s banking sector, revealing that four banks, including one state-owned institution, remain severely undercapitalised despite recent reforms.

This disclosure was contained in the Fund’s latest Staff Report, which assessed the progress of Ghana’s financial sector reforms under the ongoing economic adjustment programme.

According to the IMF, the affected banks have failed to meet required capital commitments, while elevated levels of non-performing loans continue to weaken their balance sheets. In some cases, the report noted that credit impairments identified during the Bank of Ghana’s 2023 Asset Quality Review have not been fully booked, further understating the extent of financial stress within these institutions.

State-Owned Bank Shows Worsening Position

Of particular concern to the Bretton Woods institution is the deterioration in the financial position of one state-owned bank. The IMF noted that instead of stabilising, the bank’s capital position has worsened in recent months, underscoring persistent governance and risk management challenges that have historically plagued state-owned financial institutions.

This development raises fresh questions about the effectiveness of past recapitalisation efforts and the sustainability of public sector involvement in banking. While government assurances have consistently pointed to progress in stabilising the sector, the IMF’s assessment suggests that vulnerabilities remain deeply entrenched.

Despite these challenges, the IMF acknowledged the government’s commitment to fully recapitalise the two state-owned banks using budgetary resources by the end of 2025. Authorities have reiterated that these interventions are aimed at safeguarding financial stability and restoring confidence in the banking system.

The Fund, however, stressed that future public support will be carefully limited. According to the report, the Ministry of Finance and the Bank of Ghana have agreed that additional state assistance will only be extended to banks deemed systemically important, and such support will be strictly structured to minimise fiscal risks.

World Bank Funds to Be Repurposed

The report also shed light on the fate of the World Bank-supported Ghana Financial Stability Fund. Following Parliament’s rejection of the GFSF A116 arrangement, the authorities are now working with the World Bank to repurpose the funds to address legacy issues within the Specialised Deposit-Taking Institutions sector.

This move is expected to help clean up long-standing weaknesses among microfinance institutions, rural banks and savings and loans companies, many of which have struggled since the financial sector cleanup. The IMF views this redirection as a necessary step to prevent contagion risks that could spill over into the broader banking system.

Another notable concern highlighted by the IMF is the increasing level of state ownership in some banks following capital injections from the Financial Stability Fund. The Fund revealed that capital support to two undercapitalised banks has tipped government shareholding into majority positions.

While authorities have indicated that this situation is temporary, with state ownership expected to revert to non-majority status after ongoing negotiations with private investors, the IMF cautioned that prolonged state control could weaken governance standards and distort market discipline if not carefully managed.

NIB Recapitalisation Plan Gains Momentum

In contrast to the broader concerns, the IMF offered a more positive assessment of the National Investment Bank’s restructuring efforts. After prolonged delays, the government and the Bank of Ghana have begun implementing NIB’s long-awaited recapitalisation plan.

The central bank confirmed that a combination of cash injections and bond issuances has been used to restore NIB’s Capital Adequacy Ratio to full compliance with the minimum regulatory requirement of 13 percent without regulatory forbearance. This milestone was achieved by the end of May 2025, ahead of the original end-2025 deadline.

Beyond capital restoration, authorities have initiated governance and operational reforms at NIB. These include strengthening risk management frameworks, improving oversight structures, refining the bank’s business model and addressing additional resource needs to ensure long-term viability.

Meanwhile, the IMF’s findings highlight the delicate balance facing Ghana’s financial sector reforms. While notable progress has been made since the banking sector cleanup, lingering capital weaknesses and governance challenges continue to pose risks to financial stability.

Analysts note that sustained reform efforts, transparent supervision and timely recapitalisation will be critical to restoring investor confidence and ensuring that banks can effectively support economic recovery. As Ghana navigates a fragile macroeconomic environment, the resilience of its banking sector remains central to the country’s broader economic outlook.