From stability to strength – Building depth and durability in our financial markets

By Norman Adu BAMFO

Ghana’s financial markets enter 2026 in a far more stable position than they occupied just a few years ago. The crisis conditions that followed the Domestic Debt Exchange Programme (DDEP), surging inflation, and severe foreign exchange pressures have eased. Inflation has fallen sharply, interest rates have moderated, the cedi has strengthened, and reserves have improved. Financial institutions are rebuilding buffers, and investor confidence is gradually returning.

Yet stability alone does not guarantee progress. A system can be stable and still be too shallow to finance growth or too fragile to withstand the next shock. The data from 2025 show clear progress, but they also reveal the work that remains. For 2026, Ghana’s financial market strategy must focus on strength, depth, and durability.

Macroeconomic stability – The foundation has been rebuilt

The macroeconomic turnaround in 2025 created the platform on which financial market reform must now stand. Headline inflation fell from 23.8percent in December 2024 to 5.4percent in December 2025 and 3.8percent at the start of 2026, marking one of the most significant disinflation episodes in recent years. This restored purchasing power and improved planning certainty for households and firms.

Interest rate conditions also shifted decisively. Treasury bill rates dropped from around 29percent to approximately 12percent, sharply lowering government’s short-term borrowing costs. The Ghana Reference Rate declined from 29.31percent to 15.90percent, while the average lending rate fell by 9.8 percentage points to 20.45percent by December 2025. These shifts signalled improving monetary transmission, further reinforced by cumulative policy easing that brought the Monetary Policy Rate to 18percent by late 2025 and 15.5percent at the start of 2026.

On the external side, the turnaround was equally striking. The cedi recorded an appreciation of about 40.7percent in 2025, a dramatic reversal from the 19.2percent depreciation in 2024. Meanwhile, gross international reserves rose to US$13.8 billion (5.7 months of import cover) from US$9.1 billion (4.1 months) a year earlier. These gains significantly reduced exchange rate risk and strengthened investor confidence.

Fiscal performance reinforced the macro recovery. Public debt declined from GH¢742.5 billion (63.1percent of GDP) in November 2024 to GH¢644.6 billion (45.5percent of GDP) by November 2025, supported by fiscal consolidation and improved revenue performance.

This macro stabilization was real and hard-earned. But stability at the macro level does not automatically translate into a deep or resilient financial system.

Financial sector healing – Stronger balance sheets, cautious intermediation

The banking system made measurable progress in 2025. The Capital Adequacy Ratio (without relief) improved from 11.3percent to 17.5percent, while non-performing loans declined by 2.28 percentage points to 18.9percent. These indicators reflect early healing after the DDEP shock and suggest improved institutional resilience.

Credit conditions also began to ease. Nominal private sector credit rose to GH¢106.2 billion from GH¢89.1 billion a year earlier. While this indicates recovery, credit growth remains cautious relative to the needs of a growing economy. Banks, understandably, are still rebuilding risk appetite and balance sheet strength. This cautious stance supports stability but highlights a deeper issue: a financial system that is safe but not sufficiently active in funding productive investment risks becoming a brake on growth.

Market performance – Recovery without full depth

Activity in Ghana’s capital markets improved, but structural depth remains limited. Fixed income market turnover rose from GH¢17 billion to GH¢27.6 billion, and equity market capitalization increased by GH¢60.6 billion to GH¢111.4 billion. These are important signs of renewed participation and improved sentiment.

However, the system remains heavily concentrated in government securities, with limited corporate bond issuance and thin secondary market liquidity. Buy-and-hold strategies continue to dominate institutional portfolios, reducing turnover and weakening price discovery. Without deeper markets, the yield curve cannot fully perform its signaling role, and the cost of capital remains structurally elevated for private issuers. In such an environment, stability can paradoxically lead to stagnation. When financial institutions prefer the safety of sovereign assets over productive risk-taking, capital formation slows and long-term growth suffers.

Confidence and growth – Momentum that must be sustained

The broader economy showed encouraging signs. GDP growth reached 6.1percent in the first three quarters of 2025, up from 5.7percent a year earlier. The Business Confidence Index improved from 96.6 to 107.7, and the Consumer Confidence Index rose from 90.2 to 116.4. Credit rating upgrades from Fitch, Moody’s, and S&P further strengthened Ghana’s credibility in international markets. These improvements provide a window of opportunity. But confidence is highly sensitive to policy signals. Any fiscal slippage, policy inconsistency, or renewed FX instability could quickly reverse the gains made.

The 2026 imperative – Building strength, depth, and durability

The challenge for 2026 is to convert stabilization into structural capability.

1. Strength means maintaining policy credibility while ensuring that financial institutions resume their core role of channeling savings into productive sectors. A strong system is not one that merely survives shocks, but one that supports growth without compromising prudence.
2. Depth requires expanding beyond a sovereign-dominated market structure. Developing active secondary markets, repo markets, corporate debt instruments, and infrastructure financing vehicles will improve liquidity, pricing efficiency, and investment options.
3. Durability involves building buffers and reducing structural vulnerabilities. Longer debt maturities, diversified funding sources, stronger institutional governance, and better risk management tools will help ensure that future shocks do not trigger systemic stress.

Conclusion – Stability is the starting point, not the destination

Ghana’s financial markets in 2025 demonstrated that stabilization is possible even after severe dislocation. Inflation fell, the currency strengthened, debt ratios improved, reserves increased, and financial institutions rebuilt capital. But stability without depth limits growth. Stability without strength leaves the system exposed. The task for 2026 is to ensure that Ghana’s financial markets evolve from a system designed for recovery into one capable of financing transformation. The next phase of Ghana’s financial story will not be written by stability alone, but by how effectively that stability is used to build stronger institutions, deeper markets, and more durable financial structures.

>>>the writer is a seasoned professional in risk, finance, banking, and treasury management with over a decade of academic and industry experience. He holds an MPhil in Finance (UGBS) and a First-Class Honors BSc in Actuarial Science (KNUST), and is a Chartered Global Investment Analyst as well as an ACI-Certified Treasury Professional (Distinction). A member of ACIFMA Ghana, he also holds a Leadership and Management Certificate from IMD Business School, Switzerland. He serves as a Part-time Lecturer at the University of Ghana Graduate Business School and Instructor at the National Banking College. His dual engagement in academia and industry enables him to bridge theory and practice, advancing financial market knowledge, innovation, and governance across Ghana’s banking sector and emerging financial markets. ([email protected], +233240402075)