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Dean of the Business School of the University of Cape Coast Professor John Gatsi has said that the Bank of Ghana (BoG) cannot take shelter in the issues that other central banks are facing for its loss.
He stated that the issues that affected the central banks of other countries differ from what the BoG suffered.
He stated that prior to the Covid outbreak, the BoG was lending to the central government in excess of its requirement.
Speaking on the Ghana Tonight show on TV3 Tuesday, August 2, “The Bank of Ghana cannot take shelter from that. the reality is that it is not the same fact that caused the Bank of England for example, to make the loss.
“It is not the same factor that the central bank of the Netherlands made some losses, it is not the same factor that caused the central bank in the US to limit some of its activities. for about three years running, before Covid started, the BoG was lending in excess of the regulatory requirement to the central government, which was a breach.”
The BoG in a statement answering some questions relating to GHS60.8billion loss, said that other central banks are also experiencing losses.
“Are there Central Banks that made losses in 2022 comparable to what Ghana experienced in 2022: In 2022, several central banks run losses and, in some cases, the losses pushed them into negative equity. Let me touch on a few of them and the statistics:
“The Reserve Bank of Australia (RBA) recorded a 2022 book loss of 37 billion Australian dollars, which more than wiped out the central bank’s equity. The UK Government faces £150 billion bill to cover Bank of England’s losses (According to the Financial Times of July 25, 2023).
“The Swiss National Bank (SNB) in early January reported a record preliminary loss of 132
billion francs for 2022. In September 2022, the central bank of the Netherlands notified the country’s government in a letter that it projects net interest losses amounting to a potential EUR 9 billion for the years 2023 through 2026. The US Federal Reserve has no longer been able to remit weekly billion-dollar transfers to the US Treasury since autumn 2022. Instead, a debt obligation to the US Treasury (a liability that the Fed recognizes as a deferred asset) has been growing on the Fed’s balance sheet since then. The Fed eventually will have to pay this liability sometime in the future (when it resumes generating profits).
For the financial year ended 31 March 2023, the Monetary Authority of Singapore recorded
a net loss of $30.8 billion. Why Central Banks are reporting losses in 2022: Central banks exist to fulfil their policy mandates, including price and financial stability.
“The attainment of this mandate involves the central bank taking on financial risks such as credit risk and interest rate risks, through loans to commercial banks/government or currency risk, through the holding of foreign exchange reserves.
“Some of these risks may materialize leading to losses. Making losses may therefore be perfectly compatible with a central bank’s remit of ensuring the smooth functioning of the economy.
“It contributes to a well-functioning economy by maintaining confidence in the financial system and by stabilizing inflation and economic activity. Therefore, the success of central bank interventions should always be judged on whether they fulfil these mandates.
“Over the course of 2022, Central Banks around the world aggressively hiked interest rates in an attempt to tackle record-high inflation and re-anchor inflation expectations. These decisive actions have led to losses and in some cases negative equities (i.e. assets < liabilities), raising concerns about the ability of such central banks to fulfil their mandates of price and financial stability.”
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