BoG assures of policy solvency despite DDEP-induced difficulties

The Bank of Ghana (BoG) has said it remains steadfast in its commitment to policy solvency – focusing on managing inflation and ensuring financial stability – despite challenges posed by the Domestic Debt Exchange Programme (DDEP).

Director of Research-BoG, Dr. Philip Abradu-Otoo, made the assurance while insisting that there is a plan in place to gradually restore the central bank to positive territory, even as the DDEP has been the primary reason for negative equity and losses of GH¢60billion as captured in its 2022 annual report.

Addressing media during a briefing on the BoG’s 2022 annual report in Accra, Dr. Abradu-Otoo highlighted discussions with the International Monetary Fund regarding the need for recapitalizing the central bank. With BoG’s current capital of GH¢10million deemed inadequate compared to commercial banks’ minimum stated capital of GH¢400million, the IMF suggested that some form of capitalisation will be necessary.

He emphasised that the proposal will be pursued after the country has gone through the IMF programme and generated a healthy primary balance.

Despite the negative equity caused by the DDEP, the Bank of Ghana – being a non-profit public policy institution – maintains its policy solvency, which is independent of its capitalisation level. Nevertheless, Dr. Abradu-Otoo stressed the significance of addressing negative equity in central banks to uphold credibility.

Based on assessments by external auditors and the IMF, he said, structures are in place to ensure the BoG remains policy-solvent and continues to deliver on its primary mandate.

Furthermore, specific structures and actions have been identified – including potential recapitalization by government – over the next five years to restore the bank to positive equity while effectively discharging its mandate, he further revealed.

Regarding losses incurred, Dr. Abradu-Otoo clarified that the BoG’s primary role is not profit-making, but instead that profits are transferred to government. The law however lacks clarity on addressing losses – leading him to mention the Bank of England’s similar situation when the Bank of England promptly requested the British government to provide funds to prevent impairing its operations.

The losses experienced by the BoG are partly attributed to the domestic debt exchange, along with losses from the quantitative easing programme and interest rate changes. To address these challenges urgently, the question of whether to approach government for assistance in covering these losses arises. However, considering government’s current IMF programme the available fiscal space may be limited, as Abradu-Otoo noted.

Based on the BoG’s 2022 annual report, as of December 31, 2022 the Bank of Ghana and its subsidiaries’ total liabilities exceeded its total assets by GH¢54.52billion. The decline in the group’s net worth position was primarily due to the DDEP’s impact and impairment of some assets – including government securities holdings, loans and advances granted to quasi-government and financial institutions, and currency exchange losses.

To recover and rebuild positive equity, he said, specific steps have been outlined: including retaining profits, refraining from monetary financing of government’s budget and optimising investment portfolios and operating costs, as well as assessing the potential need for government recapitalization support in the medium- to long term.

Stephen Opata, Advisor to the Governor of the Bank of Ghana, onhis part emphasised that the losses incurred were not due to bad policy decisions but rather a consequence of government’s necessary debt restructuring exercise. He insisted that the restructuring aims to prevent default and restore confidence in the economy.

He acknowledged some delays in payments, but assured efforts are being made to address these issues and restore confidence in the system.

Going forward, Mr. Opata said, the central bank aims to clean up the debt situation and bring it to a sustainable path – gradually regaining confidence through issuing longer-term debt and reducing inflation.

Admittedly, he said, restoring confidence may be a slow process; but progress has been made and the bank is optimistic that confidence will improve over time.



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The Bank of Ghana (BoG) has said it remains steadfast in its commitment to policy solvency – focusing on managing inflation and ensuring financial stability – despite challenges posed by the Domestic Debt Exchange Programme (DDEP).