BoG losses and public gains: Understanding the accounting cost of Ghana’s monetary stabilisation and the benefit to citizens

By Dr Theophilus ACHEAMPONG & Dr Stephen LARTEY

The Bank of Ghana’s 2025 annual financial results, released on 1 May 2025, show a significant accounting loss. This outcome has attracted considerable public commentary, and it is important that it be properly understood. An accounting loss on a central bank’s balance sheet is not, in itself, evidence of institutional failure. In Ghana’s case, it is the direct financial consequence of the monetary policy interventions that produced the most significant macroeconomic stabilisation the country has experienced in recent history. The Bank remains policy solvent.

This article examines the four specific sources that drove the loss, sets them against the measurable benefits they delivered to households, businesses, and the broader economy, and draws on original econometric analysis to assess the extent to which macro stabilisation has transmitted to real-sector outcomes. The conclusion is straightforward: the accounting cost is real, but so is the policy benefit. Understanding one without the other produces an incomplete and misleading picture of Ghana’s central bank and its recent conduct.

THE MACRO RECOVERY IN CONTEXT

Before examining the losses, it is worth anchoring the discussion in what monetary policy actually delivered. The data is unambiguous. Three years ago, headline inflation in Ghana peaked at 54.1 per cent. The cedi was in freefall, public debt sat at 78.6 per cent of GDP, and reserves had reduced to 2.71 months of import cover.

However, by December 2025, inflation had reduced to 5.4 per cent — marginally below the Bank of Ghana’s 6 to 10  per cent medium-term target, and reaching its lowest level in almost 30 years. The cedi appreciated by 40.7 per cent in 2025. Gross international reserves reached a record $14.5 billion in February 2026, equivalent to 5.85 months of import cover, up from just 2.71 months at end-2022. GDP growth reached 6.02 per cent overall and 7.57 per cent on a non-oil basis in 2025 — the strongest non-oil performance since 2019. Ghana also recorded a primary fiscal surplus of 2.6 per cent of GDP in 2025. These outcomes are the direct result of deliberate fiscal and monetary policy interventions.

FOUR SOURCES OF THE ACCOUNTING LOSS

The Bank of Ghana has itself identified four specific sources that drove the accounting loss. Each one is the direct financial consequence of a deliberate monetary policy intervention. None represents mismanagement or waste. Understanding them individually is essential to understanding the overall picture.

Debt Exchange Programme

The first source is the domestic debt exchange programme. When Ghana restructured its domestic debt as part of the IMF-supported adjustment, the Bank of Ghana participated as a national policy decision. Restructuring of government securities reduced the income-generating capacity of the Bank’s asset portfolio. This is a one-off cost of an unavoidable national adjustment, not evidence of poor management.

Open Market Operations

The second source is the cost of open market operations. To bring inflation from 54.1 per cent down to single digits, the Bank of Ghana had to withdraw large quantities of excess liquidity from the financial system. The instrument it used — open market operations — requires paying interest to attract deposits from commercial banks. As monetary tightening intensified, these costs rose from GHC 8.6 billion to approximately GHC 16.7 billion. This expenditure is, in economic terms, the price of disinflation. Every decimal point by which inflation was reduced cost money. The citizens who benefited from lower inflation are, in a meaningful sense, the recipients of a public good purchased at a cost that shows up as a loss on the central bank’s books.

Ghana’s Domestic Gold Programme

The third source is an accounting treatment specific to Ghana’s domestic gold programme. Gold is purchased locally at market rates but recorded on the Bank’s books at the official interbank rate. The gap between these two rates creates a paper loss that does not reflect any actual loss of value. The gold is fully held. No wealth has been destroyed. The loss is an artefact of accounting convention, not of poor investment decisions.

Mechanical Valuation Effect

The fourth source is a mechanical valuation effect. When the cedi strengthened by 40.7 per cent in 2025, the cedi-denominated value of foreign-currency reserve assets fell on the balance sheet. The physical assets — the dollars, euros, and gold — remain fully in place and unchanged in foreign currency terms. This is the mirror image of the large valuation gain recorded in 2024 when the cedi weakened. It is a natural consequence of the exchange rate recovery that citizens and businesses experienced as lower import costs and cheaper fuel.

These accounting losses do not affect the Bank of Ghana’s ability to conduct monetary policy or fulfil its mandate. Central banks are not commercial banks — negative net worth does not impair their capacity to set interest rates, manage reserves, or fulfil their mandate.

CITIZENS’ BENEFIT: THE OTHER SIDE OF THE LEDGER

A balance sheet shows costs on one side. Public debate must also weigh what was purchased with those costs. The following table sets the accounting cost of each intervention against its direct benefit to citizens.

Source: Bank of Ghana MPC Datapack, March 2026; Ghana Statistical Service.

INFLATION IS TAXATION WITHOUT LEGISLATION

Milton Friedman, the 1976 Nobel Laureate and one of the most towering figures in economics, captured the cost of inflation in a famous phrase: “inflation is taxation without legislation”. At 54.1 per cent inflation during the height of the economic crisis, the purchasing power of Ghanaian wages, savings, and transfers was being eroded at a rate that amounted to a hidden levy on economic life. At around 5 per cent, that erosion is negligible.

The Open Market Operations that drove OMO costs from GHC 8.6 billion to GHC16.7 billion were the monetary instruments that delivered that transition. The accounting loss on the Bank of Ghana’s books is, in economic terms, an opportunity cost — the price paid to restore the value of the cedi and protect the purchasing power of Ghanaians.

It is also important to note that a central bank’s accounting position is not analogous to that of a commercial bank. Central banks do not face solvency constraints in the conventional sense. A central bank with negative net worth retains full capacity to conduct monetary policy, manage reserves, and fulfil its mandate so long as it remains policy solvent. The experiences of the Czech Republic, Chile, and Israel — each of which operated with negative equity for extended periods without any monetary policy impairment — demonstrate this unambiguously.

MACRO POLICY REACHES THE REAL ECONOMY

Our econometric analysis, estimated on 96 months of data from January 2018 to December 2025, confirms that the exchange rate channel is the single most important transmission mechanism linking macro stabilisation to household and private sector conditions in Ghana. Granger causality tests show that exchange rate movements significantly precede improvements in business activity (p = 0.095). At the quarterly frequency, all three major monetary channels — inflation (p = 0.038), the monetary policy rate (p = 0.009), and the exchange rate (p = 0.042) — significantly Granger-cause real GDP growth. The monetary policy rate alone explains approximately 42 per cent of quarterly GDP forecast variance at an eight-quarter horizon.

The broader picture from the Bank of Ghana’s MPC Datapack confirms this across multiple dimensions. Real CIEA growth — the BoG’s composite activity proxy — reached 12.4 per cent in 2025, compared to negative 4.3 per cent in 2022. Consumer confidence reached 117.7 and business confidence 110.1 in January 2026 — both at record highs and both well above the 100-point neutral threshold.

The credit channel: still being restored

One dimension that the accounting loss narrative obscures is the remaining work to be done on monetary transmission. Despite the Bank of Ghana cutting its policy rate from a peak of 30 per cent to 14.0 per cent by March 2026, average commercial bank lending rates remain at around 18 per cent. The pass-through is ongoing, but it takes time.

Real private sector credit growth has turned decisively positive, reaching 19.9 per cent year-on-year by March 2026 — a dramatic recovery from the contraction of 14.5 per cent recorded in 2022. The nominal credit growth rate stands at 23.8 per cent. These are encouraging signs that the credit channel is healing.

Our VAR analysis, however, finds that no macro stabilisation variable significantly Granger-causes private sector credit growth, with all test statistics returning p-values above 0.17. This credit channel impairment reflects the lingering effects of the domestic debt exchange on bank balance sheets. Non-performing loans remain at 18.7 per cent of gross loans, off the peak of 21.8 per cent but still elevated. Banks that absorbed losses through the restructuring have not fully restored their lending capacity, and the spread between the monetary policy rate and the average lending rate remains at 3.7 percentage points. In other words, the healing is real but not yet complete. For us, this remains one of the most important unfinished business in Ghana’s monetary policy transmission.

It is precisely because the credit channel remains impaired that the BoG’s accounting loss should be understood in context. The OMO expenditure that produced the accounting loss was necessary to break inflation expectations and restore price stability. Restoring the credit channel — the final link in the transmission chain from monetary easing to real economy lending — requires time, financial sector stability, and normalisation of commercial bank balance sheets following the restructuring.

Fiscal consolidation: from runaway spending to primary surplus

The accounting losses at the central bank sit alongside a fiscal picture that has changed dramatically. Total government expenditure has been right-sized from a peak of 26.1 per cent of GDP in 2020 to 16.1 per cent in 2025. The 2020 high reflected the convergence of COVID-19 emergency spending, pre-existing wage and arrears pressures, and the off-budget liabilities that ultimately precipitated Ghana’s 2022 debt distress. The 2025 stance reflects a recalibrated fiscal framework anchored on meeting primary surplus targets, ensuring value for money through leaner expenditure envelope, and the binding programmatic discipline under the IMF Extended Credit Facility.

Government remained current on statutory commitments such as employee compensation (4 per cent over the target), grants to other government units such as DCF, NHIL, etc. (6 per cent  above target) whereas it cut back on other discretionary expenditures such as energy sector shortfalls due to renegotiated IPP contracts. Savings on interest payments partly reflected the debt-service relief secured through the Domestic Debt Exchange Programme and the external Eurobond restructuring, which together restored the fiscal space that would otherwise have crowded out primary spending. With improving fiscal space, capex spending, which remains relatively low at 9%, can now be doubled to meet structural peers benchmark of 16 per cent to 20 per cent of total spending (3.5 per cent to 5 per cent of GDP). Investments in roads and logistical infrastructure will massively address supply side constraints and increase productivity.

The external picture is equally striking. The trade surplus reached $13.8 billion in 2025 — 3.7 times the 2024 level and the largest on record — driven largely by gold exports of $21.0 billion. Ghana recorded its first current account surplus in years, at $9.4 billion.

Public debt has declined

Public debt as a share of GDP has fallen from its peak of 78.6 per cent in 2021 to 45.3 per cent in 2025 — a 33 percentage point improvement that is a genuine and significant achievement. The ratio improvement reflects GDP growth, cedi appreciation, and lower interest payments from the restructuring process.

Five structural risks being addressed

Ghana’s macro turnaround is real. The following structural risks need to be managed to anchor the turnaround.

Concluding remarks

Ghana’s central bank has taken significant losses on its books. It has done so in the course of conducting some of the most consequential monetary policy in the country’s recent history — bringing inflation to a generational low, stabilising the exchange rate, and rebuilding external buffers to record levels.

The accounting loss is an opportunity cost. The policy benefit is also real. While the number on the central bank’s income statement and balance sheet is real it has also offered citizens an opportunity to relatively retain value of their money without high inflation chipping it away; it has improved cost of living conditions and the economy is beginning to grow again. On every one of the core macro fiscal measures, the answer is significantly more positive today than it was two years ago. The financial effects on the Bank of Ghana are, as the Bank itself has correctly framed them, the accounting counterpart of the stabilisation benefits.

Going forward, the Bank of Ghana has signalled that any loss in 2026 is expected to be smaller than in 2025, as OMO sterilisation costs normalise and the post-DDEP portfolio matures. Fiscal consolidation, continued reserve accumulation, credit channel restoration, and gradual reduction in non-performing loans are all in progress. Lastly, Goldbod’s operations are also being reformed to reduce its costs while enhancing its benefits to Ghanaians through improved reserves and FX inflows.

Dr Acheampong is an Economist and political risk specialist. Technical Advisor, Ghana Ministry of Finance. PhD Economics, University of Aberdeen. More than fifteen years of experience spanning energy, extractives, and public finance. Commentary featured in BBC, The Economist, Bloomberg and The Wall Street Journal.

Dr  Lartey is a Development economist with a PhD in Economics, specialising in institutions, fiscal policy, monetary and macroeconomic policy, and causal inference. His research focuses on macroeconomic policy, structural transformation, and real-sector outcomes in sub-Saharan Africa. [email protected]

The empirical analysis cited in this article is based on monthly and quarterly data from the Bank of Ghana MPC Datapack (March 2026), the Ghana Statistical Service, and S&P Global, covering January 2018 to December 2025. Real private sector credit growth is computed using CPI with base year 2021 = 100. Stata code and the dataset are available on request from the authors.

The views expressed in this article are those of the authors in their personal capacities and do not represent the position of any institution or organisation, including the Ministry of Finance.

Post Views: 6