Ghana: BoG Focuses on Inflation Control Amid Financial Losses

BoG Focuses on Inflation Control Amid Financial Losses
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Despite reporting a significant loss of GH¢10.5 billion for 2023, the Bank of Ghana (BoG) remains steadfast in its commitment to achieving stable inflation levels, targeting a medium-term goal of 8 percent.

Bernard Otabil, BoG’s Director of Communications, emphasized the importance of reducing inflation to foster sustainable economic growth and long-term prosperity in Ghana. “Achieving low and stable inflation helps to promote exchange rate stability under a floating currency regime,” Otabil stated.

The BoG’s 2023 financial statements revealed a 47.3 percent increase in total operating income, reaching GH¢8.80 billion. This growth was primarily driven by interest earned on foreign investments, fines for regulatory breaches, and various fees and charges. However, the central bank also faced substantial expenses, with the cost of open market operations soaring more than fivefold to GH¢8.3 billion from GH¢1.7 billion in 2022.

Otabil explained that the increased costs of open market operations were necessary to absorb excess liquidity in the economy and support the process of reducing inflation. “Reducing inflation by over 30 percentage points required GH¢8.3 billion in open market operations,” he noted.

He further emphasized that central bank actions are inherently socially beneficial, and that operating losses do not undermine policy effectiveness. “Central banks can make losses, get into negative accounting equity, and still function successfully. Therefore, they should not compromise policy objectives to report profits.”

Despite the financial losses, BoG’s aggressive liquidity management efforts contributed to reducing inflation to 23.2 percent by the end of 2023, down from 54.1 percent at the end of 2022. Otabil reiterated that these losses do not signify a loss of policy effectiveness, but rather reinforce the bank’s commitment and credibility in controlling inflation.

“Our strong actions to control inflation boost confidence both domestically and internationally, essential for attracting foreign investment and maintaining favorable trade conditions,” he said.

As inflation continues to decline towards the medium-term target, BoG anticipates a reduction in interest rates and the cost of open market operations. This, in turn, is expected to support exchange rate stabilization, improving the bank’s financial position.

The 2023 annual report highlights the Monetary Policy Committee’s ongoing efforts to monitor economic risks and implement policies aimed at anchoring inflation expectations and minimizing exchange rate volatility.

Additionally, BoG’s Board is taking steps to ensure recovery and build a positive equity position in the medium to long term. These steps include refraining from monetary financing of the government’s budget, optimizing the investment portfolio, managing operating costs, and securing early recapitalization through a memorandum of understanding.

“The 2023 financial statements demonstrate our unwavering commitment to our price stability mandate and the well-being of all Ghanaians,” Otabil affirmed.

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