The Bank of Ghana’s 2025 annual financial results, released on May 1, 2025, revealed a substantial accounting loss, sparking widespread public discussion. However, this reported accounting loss does not signify institutional failure but rather represents the direct financial consequence of critical monetary policy interventions that have led to Ghana’s most significant macroeconomic stabilization in recent history. The central bank maintains its policy solvency.
Macroeconomic Recovery Amidst Policy Interventions
Three years prior to these results, Ghana grappled with severe economic challenges. Headline inflation had surged to a peak of 54.1 percent, the national currency, the cedi, was experiencing a sharp depreciation, public debt stood at 78.6 percent of GDP, and gross international reserves were critically low, covering only 2.71 months of imports.
By December 2025, a remarkable turnaround was evident. Inflation had been brought down to 5.4 percent, falling within the Bank of Ghana’s medium-term target of 6-10 percent and reaching its lowest point in nearly three decades. The cedi demonstrated significant strength, appreciating by 40.7 percent throughout 2025. Gross international reserves hit a record high of $14.5 billion by February 2026, equivalent to 5.85 months of import cover.
Furthermore, Gross Domestic Product (GDP) growth reached 6.02 percent overall and an impressive 7.57 percent on a non-oil basis in 2025, marking the strongest non-oil performance since 2019. The nation also achieved a primary fiscal surplus of 2.6 percent of GDP in 2025. These positive outcomes are attributed to deliberate fiscal and monetary policy actions.
Four Drivers of the Bank of Ghana’s Accounting Loss
The Bank of Ghana has identified four primary sources contributing to its accounting loss, each directly linked to specific monetary policy interventions rather than mismanagement.
Domestic Debt Exchange Programme
The first contributor was the bank’s participation in Ghana’s domestic debt restructuring, a national policy decision made in conjunction with an IMF-supported adjustment program. This restructuring reduced the income-generating capacity of the Bank’s asset portfolio, representing a one-off cost of a necessary national adjustment.
Open Market Operations (OMO)
To combat high inflation, the Bank of Ghana implemented open market operations to withdraw excess liquidity from the financial system. This involved paying interest to commercial banks on their deposits, leading to increased costs. These costs escalated from GHC 8.6 billion to approximately GHC 16.7 billion as monetary tightening intensified. This expenditure is viewed as the direct cost of disinflation, effectively the price paid to lower inflation for the benefit of citizens.
Ghana’s Domestic Gold Programme
An accounting convention related to Ghana’s domestic gold program created a paper loss. Gold purchased locally at market rates is recorded on the Bank’s books at the official interbank rate. The difference between these rates results in an accounting loss that does not represent an actual loss of value, as the gold remains fully held.
Mechanical Valuation Effect
The significant strengthening of the cedi by 40.7 percent in 2025 led to a reduction in the cedi-denominated value of the Bank’s foreign-currency reserve assets. While the physical assets remain unchanged in foreign currency terms, this accounting effect mirrors the valuation gains recorded in 2024 when the cedi weakened. This reflects the positive impact of exchange rate recovery on import costs and fuel prices for citizens and businesses.
Crucially, these accounting losses do not impede the Bank of Ghana’s ability to execute its monetary policy mandate. Central banks, unlike commercial banks, are not bound by solvency constraints in the same way; negative net worth does not impair their capacity to set interest rates or manage reserves.
The Tangible Benefits for Citizens
While the central bank’s balance sheet shows accounting costs, the public discourse must also consider the benefits derived from these interventions. The following outlines the accounting costs against the direct benefits experienced by citizens:
Accounting Cost vs. Citizen Benefit:
- OMO Sterilisation Costs (GHC 8.6 billion to GHC 16.7 billion) versus Inflation reduction (54.1% in Dec 2022 to 5.4% in Dec 2025).
- DDEP reduced interest income versus Cedi appreciation (+40.7% in 2025), leading to eased import costs and fuel prices.
- Gold programme accounting gap versus Record gross international reserves ($14.5 billion), providing 5.85 months of import cover.
- Paper loss on FX reserves due to cedi appreciation versus GDP growth (6.0% overall, 7.5% non-oil), with the economy crossing the $100 billion milestone.
Inflation: A Hidden Tax
Nobel laureate Milton Friedman famously described inflation as “taxation without legislation.” At its peak of 54.1 percent, the erosion of purchasing power for Ghanaian wages, savings, and transfers functioned as a substantial hidden levy. The Open Market Operations, contributing to the OMO costs, were the monetary tools that facilitated the reduction of inflation to approximately 5 percent, thereby protecting the value of Ghanaians’ money.
The accounting loss on the Bank of Ghana’s books represents an opportunity cost – the price paid to restore the cedi’s value and safeguard citizens’ purchasing power. Central bank accounting differs from that of commercial entities; policy solvency, not net worth, determines a central bank’s operational capacity, as evidenced by the experiences of countries like the Czech Republic, Chile, and Israel.
Macro Policy’s Impact on the Real Economy
Econometric analysis using 96 months of data (January 2018 to December 2025) indicates that the exchange rate is the primary channel through which macroeconomic stabilization impacts household and private sector conditions in Ghana. Granger causality tests reveal that exchange rate movements significantly precede improvements in business activity. At the quarterly frequency, inflation, the monetary policy rate, and the exchange rate all significantly influence real GDP growth. The monetary policy rate alone accounts for approximately 42 percent of quarterly GDP forecast variance over an eight-quarter horizon.
Data from the Bank of Ghana’s MPC Datapack further supports this, showing real Composite Index of Economic Activities (CIEA) growth reaching 12.4 percent in 2025, a stark contrast to the negative 4.3 percent in 2022. Consumer and business confidence indices reached record highs in January 2026, both exceeding the 100-point neutral threshold.
The Credit Channel: Progress and Remaining Challenges
Despite the Bank of Ghana reducing its policy rate from a peak of 30 percent to 14.0 percent by March 2026, average commercial bank lending rates remain around 18 percent. The pass-through of policy rate cuts to lending rates is ongoing but takes time.
Real private sector credit growth has turned positive, reaching 19.9 percent year-on-year by March 2026, a significant recovery from a 14.5 percent contraction in 2022. Nominal credit growth stands at 23.8 percent. However, econometric analysis indicates that no macroeconomic stabilization variable significantly predicts private sector credit growth, suggesting a lingering impairment of the credit channel. This is attributed to the effects of the domestic debt exchange on bank balance sheets, with non-performing loans remaining elevated at 18.7 percent of gross loans.
The spread between the monetary policy rate and the average lending rate remains at 3.7 percentage points, indicating that while the credit channel is healing, it is not yet fully restored. This remains a key area of focus for Ghana’s monetary policy transmission.
Fiscal Consolidation and Debt Reduction
The central bank’s accounting losses occur alongside a dramatic improvement in the fiscal landscape. Total government expenditure has been reduced from a peak of 26.1 percent of GDP in 2020 to 16.1 percent in 2025, reflecting a recalibrated fiscal framework focused on primary surplus targets and efficient spending.
Government has maintained statutory commitments while cutting discretionary expenditures. Savings on interest payments resulted from debt restructuring, which freed up fiscal space. Public debt as a share of GDP has fallen significantly from 78.6 percent in 2021 to 45.3 percent in 2025, an improvement driven by GDP growth, cedi appreciation, and lower interest payments.
Addressing Structural Risks for Sustained Growth
While Ghana’s macroeconomic turnaround is evident, several structural risks require careful management to ensure sustained stability:
- Gold Windfall Risk: High gold export earnings provide a strong external buffer, but potential price corrections necessitate structural transformation efforts for diversification.
- Cocoa Price Slump: Falling cocoa prices could impact export earnings and rural incomes, requiring ongoing reforms and productivity enhancements in the agricultural sector.
- Revenue Mobilisation: Tax revenue as a percentage of GDP remains structurally low. Reforms aimed at expanding the revenue base are crucial for fiscal sustainability and increased capital investment.
- Compressed Capital Expenditure: Public investment remains low, hindering long-run growth. Initiatives like the “Big Push” infrastructure drive aim to address this.
- NPL Overhang and Credit Constraints: Elevated non-performing loans continue to constrain bank lending. Reforms are focused on accelerating loan write-offs, strengthening credit risk management, and enforcing accountability for defaults.
Forward-Looking Outlook
The Bank of Ghana anticipates a smaller accounting loss in 2026 as OMO sterilization costs normalize and the post-DDEP portfolio matures. Fiscal consolidation, continued reserve accumulation, restoration of the credit channel, and reduction in non-performing loans are ongoing. Reforms to the domestic gold programme are also underway to reduce costs and enhance benefits. The economic stabilization achieved, while incurring accounting costs, has provided tangible benefits to citizens through preserved purchasing power, improved living conditions, and renewed economic growth. The focus now shifts to consolidating these gains and addressing the remaining structural challenges to ensure long-term prosperity.
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