Although private sector credit growth is yet to fully recover to pre-pandemic levels, Bank of Ghana Governor Dr. Ernest Addison is confident that as momentum in economic activity picks up, which will be hinged on response to the vaccination exercise, banks will make more financing available to businesses.

As of August this year, the annual nominal growth in private sector credit slowed to 9.5 percent compared with 14.3 percent during the same period of 2020. Real private sector credit meanwhile contracted marginally, by 0.1 percent compared to a growth of 3.4 percent recorded over the same period.

Speaking in Accra during the opening event of the three-day Ghana Economic Forum, organized by the B&FT and themed ‘Strengthening homegrown policies to underpin the national digitization drive and shared financial prosperity’, the Governor said the country’s economy is rebounding and he expects that, coupled with efforts to get more citizens vaccinated, to ease private sector credit.

“A lingering problem has been private sector credit growth, which has not fully recovered to pre-pandemic levels due to uncertainties surrounding the pandemic’s trajectory. As the momentum in economic activity picks up coupled with continued COVID vaccination efforts, and demand for bankable projects increase, we expect private sector credit to rebound,” Dr. Addison projected.

The central bank had said the slump in credit to the private sector was due to supply-side risk aversion from shocks of the pandemic, as well as slower-than-expected growth in demand for loans that are backed by bankable projects.

But as the economy returns to a growth path, according to second quarter data from the Ghana Statistical Service which show a GDP growth of 3.9 percent, Dr. Addison is optimistic domestic credit to the private sector – financial resources provided to the private sector by financial corporations such as through loans, purchases of non-equity securities, and trade credits and other accounts receivable – will rebound to support the economy’s growth amid the ongoing global economic crisis.

On banks credit stress levels, he said the comprehensive reforms and recapitalization undertaken by the regulator prior to the global crisis positioned banks with strong capital buffers before onset of the COVID-19 shock.

“In addition, the financial sector received a further boost with macro prudential regulatory reliefs to ease liquidity constraints, and allowed them to provide financial support to critical sectors of the economy as part of the COVID-19 policy responses.

“Following these interventions, the banking sector has remained stable, liquid and profitable. The latest stress tests and macro-prudential risk assessments on the industry show that banks are strong enough to withstand mild to moderate liquidity and credit risk shocks.”