If the state of the world economy does not improve, the International Monetary Fund predicts a bleak future for the banking industry in emerging nations like Ghana.
The most recent Global Financial Stability Report issued by the IMF reflected this.
In 2017, the Ghanaian government began a clean-up operation of the banking industry with the goal of regaining public trust in the nation's financial system.
Ghana already struggles with high policy rates, escalating inflation, and cedi depreciation.
To save the already failing economy, the Ghanaian government and central bank have already taken action, including applying for an IMF bailout.
The government attributed the deteriorating economy to the Russia-Ukraine War and the COVID pandemic's negative impacts.
According to the Bretton Woods institution, if current global financial conditions continue, several economies risk entering a recession.
According to the Global Financial Stability Study, there are now more threats to financial stability than there were in the previous report, and the balance of those threats is now more negative.
However, the global bank stress test indicates that these buffers may not be sufficient for some banks going into 2023 as an abrupt and sharp tightening of global financial conditions could send several economies into recession along with high inflation, leading to a breach in capital requirements. The report stated that although the global banking sector had withstood pressures to date.
Dr. Patrick Assuming, an economist at the University of Ghana Business School, stated in an interview that important steps must be implemented to support the profitability of the banks.