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The BoG’s annual financial report for 2022 indicated a GHS60.81 billion loss, while its net equity also went over GHS55 billion in the negative, which according to various analyst, means that the central bank is insolvent.
The bank’s financial report also indicated some very significant jumps in various expenses including communication, travel and others, which it has explained, even though many Ghanaians, particularly the Minority in Parliament still insist the leadership of the bank failed on the job.
But the IMF, in response to a list of frequently asked questions, stated that the current financial position of the BoG is due its participation in the government’s DDE program, but all is not lost.
Here is what the IMF said about the DDE and its impact on the BoG:
The Ghanaian authorities’ domestic debt exchange (DDE) is a key element of their plan to restore macroeconomic stability and public debt sustainability. The BoG is participating in the DDE to share some of the burden the DDE places on government debt holders, along with banks, other financial institutions, pension funds and individuals.
The loss the BoG incurred in the process has contributed to reducing its net equity to a negative value. Importantly, however, this does not prevent the BoG from fulfilling its policy mandates and ensuring inflation gradually returns toward its 8-percent target. Indeed, central bank income is expected to be sufficient to cover monetary policy operational costs. The BoG’s net equity is expected to improve significantly over time and eventually return to positive territory.
Below is the full text of the FAQ and responses from IMF.
Why did Ghana need an IMF program?
Ghana has been facing a severe economic and financial crisis, with a debt burden assessed as unsustainable. Specifically, a combination of pre-existing vulnerabilities and external shocks such as the COVID-19 pandemic and Russia’s war in Ukraine have resulted in acute financing pressures, a depreciating cedi, declining international reserves, slowing economic activity, and high inflation.
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