Inside the numbers: Understanding the Bank of Ghana losses and the impact on the economy

By Desmond Isaac ADDO

Email: [email protected]

In May 2026, the Bank of Ghana declared losses of over GH¢15 billion for the 2025 financial year. Some people believe the losses are evidence of economic mismanagement. Others also argue that the losses were the unavoidable cost of stabilizing Ghana’s economy after years of inflation, cedi depreciation and financial instability.

To properly understand the debate, we must first understand the mandate of the Bank of Ghana, the major causes of the losses, what actually transpired in simple terms, and whether the sacrifices made ultimately benefited the Ghanaian economy.

The mandate of BoG

The Bank of Ghana (BoG) is Ghana’s central bank. Unlike commercial banks whose primary objective is profitability, the Bank of Ghana’s main responsibility is to maintain economic and financial stability.

Its key functions include:

• Controlling inflation
• Maintaining stability of the Ghana cedi
• Regulating and supervising banks
• Managing Ghana’s foreign reserves
• Supporting a stable financial system
• Implementing monetary policy

In simple terms, the Bank of Ghana is like the “financial referee” of the economy. Its job is to make sure the economy does not overheat, the currency does not collapse, banks remain stable, and people continue to have confidence in the financial system.

This also means that sometimes, the Bank of Ghana takes decisions that are expensive in the short term if those decisions help prevent a much bigger economic crisis in the future.

Extract from BoG financials

It is important to note that the Bank of Ghana’s financial statements run into well over 100 pages and contain several technical accounting, monetary and reserve management disclosures that cannot all be fully discussed in a single article.

This article therefore focuses mainly on the major areas that generated public concern and debate, particularly the key drivers of the reported loss and their broader impact on the Ghanaian economy.

The main causes of the loss

The major causes of the Bank of Ghana’s loss include:

1. Cost of Open Market Operations (OMO) and liquidity sterilization
2. Exchange rate and valuation losses
3. Net losses on gold operations
4. Costs linked to fighting inflation
5. Pressure from earlier economic shocks and debt restructuring

To make sense of these, it is important to break them down one by one and explain them in simple, practical terms.

1. Cost of Open Market Operations (OMO)

Reported Figure: GH¢16.73 billion

One of the biggest drivers of the loss was the money the Bank of Ghana paid to commercial banks through Open Market Operations (OMO), mainly to reduce excess money in the economy.

What actually happened?

After the economic crisis and high inflation period, there was too much money circulating in the banking system. In simple terms, banks had excess cash that could easily be lent out.

The Bank of Ghana became concerned that if this money kept circulating freely:

• inflation could rise again,
• the cedi could weaken further,
• and prices of goods and services could increase again.

So, the Bank of Ghana decided to temporarily take this excess money out of circulation. This process is called liquidity sterilization.

In simple terms, instead of banks’ lending this excess money into the economy, they “parked” it with the Bank of Ghana.

But this money was not taken for free. The Bank of Ghana had to pay interest to the banks for holding it.

The challenge was that interest rates were already very high due to the earlier inflation crisis (2022 – 2024). So, the cost of this operation became very expensive.

According to the 2025 financial statements, this cost amounted to about GH¢16.73 billion.

Somewhere in 2025, University of Ghana economist Professor Godfred Bokpin noted that while sterilization by the Bank of Ghana helps reduce inflation, it also comes with trade-offs. It increases the Bank’s interest costs and can make it harder for businesses to access credit. So, in simple terms, as is always the case in economics, there is an opportunity cost; when you choose one option, you give up something else.

Simple example

Imagine 10 banks each have GH¢1 billion they do not need immediately.

Total excess money = GH¢10 billion.

The Bank of Ghana asks them to temporarily keep this money with it.

But the banks say: “We will only agree if you pay us interest.”

At 25% interest:

25% × GH¢10 billion = GH¢2.5 billion cost.

Now imagine this happening repeatedly over many months with even larger amounts. That is how the cost grew to GH¢16.73 billion.

In simple terms, the Bank of Ghana was paying billions just to keep extra money out of circulation.

2. Exchange rate and valuation losses

Reported Figure: GH¢5.47 billion

Another major cause of the loss came from changes in the exchange rate. However, the effect is not one-directional. When the cedi strengthens against the dollar, the value of foreign reserves (assets) reduces in cedi terms, which can create a loss. But at the same time, foreign liabilities become cheaper in cedi terms, which creates a gain. On the other hand, when the cedi weakens, foreign reserves increase in value, but foreign liabilities become more expensive.

So the final result is determined by the net effect of both gains and losses from the Bank of Ghana’s foreign assets and foreign liabilities combined.

What actually happened?

The exchange rate and valuation loss did not come from one direction only. During 2025, the Bank of Ghana actually recorded both gains and losses from movements in the exchange rate.

This is because the Bank holds a mix of:

• foreign currency reserves (assets),
• foreign currency obligations (liabilities),
• and engages in FX transactions throughout the year.

So when exchange rates move, some positions benefit/gain while others lose value.

The final GH¢ 5.47 billion figure is therefore the net effect after offsetting all gains and losses.

According to the financial statements:

• The Bank recorded about GH¢ 5.78 billion in exchange-related losses
• But also recorded about GH¢ 310 million in exchange-related gains
• Leaving a net loss of GH¢ 5.47 billion

Simple way to understand it

Think of it like this:

• You have investments in dollars (some go up, some go down)
• You also owe money in dollars (which also changes in value)
• And you trade dollars during the year at different rates

At the end of the year, you don’t report every individual gain or loss separately you report the net outcome after everything cancels out and that is what BoG did by reporting an accounting loss of GH¢ 5.47 billion.

3. Net losses on gold operations

Reported Figure:

GH¢9.05 billion

The Bank of Ghana also made major changes in how it handles gold.

What actually happened?

The Bank of Ghana expanded its gold programs:

• Gold for Reserves (G4R)
• Gold for Oil (G4O)

The aim was to:

• strengthen reserves
• reduce dependence on foreign currency
• support the cedi
• and improve confidence in the economy

To achieve this, the Bank of Ghana bought large quantities of gold locally using cedis, mainly from miners and aggregators. Some of this gold was later refined, stored, exported, or used in external transactions.

So how did the loss actually happen?

The loss happened because of a gap between total cost and total value recovered.

In simple terms:

What the Bank spent to acquire and process the gold was higher than what it eventually recovered from selling, swapping, or using the gold.

This gap came from a combination of practical factors:

• Higher purchase price locally vs lower official valuation/selling price internationally
• Additional processing and operational costs
• Exchange rate and timing effects

These led to the realized value being lower than the cost of sales thereby leading to a loss.

Simple example

If you buy gold today at a high price to support your cash needs later, but:

• prices change,
• costs increase,
• and selling price falls,

you can still make a loss even if the strategy helps you stay financially stable.

That is similar to what happened.

Accounting losses vs cash losses

Accounting losses are changes in reported financial value that arise from accounting rules or market revaluations and do not necessarily involve actual cash leaving the institution. Cash losses, on the other hand, involve real money being spent or paid out. In short, accounting losses affect the books, while cash losses affect liquidity.

Essentially not all losses mean actual cash has disappeared. Some arise from changes in value on paper.

• The GH¢16.73 billion OMO cost is a real cash cost (money paid to banks).
• The GH¢9.05 billion gold loss is mostly a real trading-related cost.
• The GH¢5.47 billion exchange loss is mostly a paper (accounting) loss caused by exchange rate movements.

So:

• Some losses reflect actual cash outflows.
• Others reflect accounting value changes.

Both are important, but they are not the same.

Losses under Other Comprehensive Income (OCI)

Apart from the GH¢15.6 billion operating loss, there were also large losses recorded under Other Comprehensive Income (OCI).

These include:

• changes in value of gold reserves,
• changes in foreign currency assets,
• and valuation of foreign investments.

These amounted to over GH¢23 billion.

They are captured in other comprehensive income as

What does OCI mean in simple terms?

OCI (Other Comprehensive Income) simply means “paper gains or losses” that have happened, but have not yet been realized through an actual sale or cash transaction.

These changes happen when the value of assets goes up or down on paper, but nothing has actually been sold yet.

Because of this, they are not recorded in the main income statement immediately. Instead, they are recorded separately under Other Comprehensive Income.

Simple example

If you buy a house for GH¢1 million and later the market value drops to GH¢800,000, you have a GH¢200,000 loss on paper.

But since you have not sold the house, you have not actually lost cash yet. So this GH¢200,000 is recorded in Other Comprehensive Income (OCI).

Now:

• If you later sell the house for GH¢800,000
  – the GH¢200,000 loss is then moved from OCI into the income statement as a realized loss
• If you later sell the house for GH¢1.2 million
  – the GH¢200,000 gain is moved from OCI into the income statement as a realized gain

Why is OCI not in the main loss statement?

Because:

• it is not yet realized,
• it may change in future,
• and it relates more to long-term holdings than daily operations.

So:

• Operating losses = real performance for the year
• OCI = changes in asset values on paper

Iimpact on the economy

Indicator	Before / Crisis Period	End of 2025
Inflation	Above 50% / 23.8% (end-2024)	5.4%
Exchange Rate	GH¢15 – 16/$1 at peak pressure	GH¢10 – 12/$1 range
GDP Growth	2% – 3%	5% – 5.5%
Foreign Reserves	US$ 8.98bn	US$13.8bn
Investor Confidence	Very weak	Improved significantly
Credit Rating	RD (Restricted Default)	B (Positive Outlook)
Interest Rates	Around 30% peak	Around 18%
Macroeconomic Stability	Highly unstable economy	More stable and improving

This shows that while the losses were large, key economic indicators improved significantly during the same period.

Why did the bank of ghana choose this path?

I believe the Bank of Ghana considered the bigger risk was not acting strongly enough.

It wanted to avoid:

• runaway inflation,
• further collapse of the cedi,
• loss of investor confidence,
• and instability in the banking system.

So, it chose strong intervention; even though it was expensive.

In other words, the Bank of Ghana effectively spent billions trying to buy stability for the economy. The losses therefore cannot be viewed in isolation from the broader economic outcomes that followed.

The debate therefore is whether the financial price paid for that stability was reasonable, excessive or ultimately unavoidable under the circumstances Ghana found itself in.

Conclusion

The losses of the Bank of Ghana did not happen because money simply disappeared.

They happened because of deliberate policy actions taken to stabilize the economy during a very difficult period.

The Bank of Ghana prioritized inflation control, currency stability, financial system confidence and overall economic stability.

Supporters believe these actions helped Ghana avoid a deeper crisis. Critics believe the same outcome could have been achieved at a lower cost.

In the end, the real question is not just about the size of the loss.

The question is whether the stability achieved was worth the cost paid for it and whether the regulator has succeeded in performing its mandate.

That, my dear friends, is for Ghanaians to decide.

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