The International Monetary Fund (IMF) has backed the Bank of Ghana’s GHS 60 billion loss incurred in 2022.
The Fund says the impairment which was brought on by the government’s Domestic Debt Exchange (DDE) was necessary to “restore macroeconomic stability and public sustainability.”
The Bank of Ghana incurred the loss largely as a result of the government’s Domestic Exchange Programme (DDEP) after its non-marketable holdings of government of Ghana instruments including long-term stocks, a COVID-19 Bond, and overdraft were subjected to a 50 per cent haircut.
Also, the Bank’s other claims (holdings of marketable instruments) were exchanged under similar terms as other financial institutions under the DDEP, leading to the impairment.
In addition, the Bank incurred revaluation losses on its foreign assets and liabilities due to exchange rate depreciation, leading to a total loss of GH¢55.12bn equity in 2022.
The Central Bank has said, it had to ‘take the hit’ to salvage the economy but this explanation has not satisfied industry players who blame the Bank of Ghana for fiscal irresponsibility and unsound practices – a claim the Bank has vehemently refuted.
The latest to jump to the defence of the Bank of Ghana is the financial agency (IMF) which is providing Ghana with a US$ 3billion bailout which has led to the restructuring to bring the country’s debt to sustainable levels.
It asserts that the BoG’s participation in the DDE was to share some of the burden the DDE places on government debt holders, along with banks, other financial institutions, pensions funds and individuals.
In a statement, it further added that, “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 towards its 8-percent target.”
In fact, the IMF anticipates that central bank income will be adequate to cover the costs associated with monetary policy.
“The BoG’s net equity is expected to improve significantly over time and eventually return to positive territory”, the IMF concluded.
