Accra, Ghana – The Bank of Ghana’s 2025 fiscal year concluded with a reported operational deficit of GH¢15.63 billion, a figure that has ignited significant debate regarding central bank accounting and economic stability. This substantial loss, stemming from aggressive monetary policy interventions aimed at combating high inflation and currency depreciation, represents a deliberate absorption of economic risk by the central bank to safeguard the nation’s financial health.
Central Bank Solvency vs. Commercial Solvency
The immediate reaction to the Bank of Ghana’s deficit has been to equate it with the insolvency of a commercial entity. However, modern central banking principles and international research distinguish sharply between the two.
Unlike commercial banks, which rely on public confidence and cannot create their own currency, central banks possess the unique ability to issue legal tender. This fundamental difference means a central bank cannot become bankrupt in its own jurisdiction, as it can always meet its domestic currency obligations.
The Bank for International Settlements (BIS) has clarified in its Bulletin No. 68 that central bank losses, even negative equity, do not impede their operational effectiveness. The true measure of a central bank’s success lies in achieving its policy goals—price stability, currency stability, and economic growth—rather than its balance sheet profitability.
Academic research, such as a National Bureau of Economic Research (NBER) working paper by Robert E. Hall and Ricardo Reis, supports the notion of a “new style of central banking” where central banks may incur losses as a predictable outcome of economic stabilization efforts. These losses often arise from paying high interest rates on reserves to combat inflation while holding lower-yielding assets, a mismatch that is a deliberate part of modern crisis management.
Deconstructing the 2025 Financial Deficit
The GH¢15.63 billion deficit is not a product of mismanagement but a mathematical consequence of deliberate policy actions designed to rescue the Ghanaian economy from a crisis of high inflation and currency depreciation.
A primary driver of the loss was the cost of liquidity management. Before 2024, Ghana experienced excess liquidity, fueling inflation that reached 54 percent and causing rapid cedi depreciation. To combat this, the Bank of Ghana issued high-interest short-term bills to absorb excess money from the banking sector, effectively removing it from circulation.
The central bank had to offer significantly high interest rates on these sterilization bills, with the Monetary Policy Rate reaching between 27.00 percent and 28.00 percent at its peak. This resulted in massive interest expenses, with the cost of absorbing excess liquidity rising from GH¢8.6 billion in 2024 to GH¢16.7 billion in 2025. This was exacerbated by the Domestic Debt Exchange Programme (DDEP), which saw the Bank of Ghana holding low-yielding restructured government debt while paying high interest on its sterilization bills, creating a substantial negative carry cost.
Another significant factor contributing to the deficit was the accounting treatment of foreign exchange reserves. As the Bank of Ghana’s policies successfully strengthened the cedi against the US dollar, the local currency value of its foreign currency holdings decreased. This accounting effect, a paper loss, does not represent a physical outflow of funds or a reduction in the nation’s international purchasing power, but rather the mathematical outcome of a stronger cedi.
The expansion of the Domestic Gold Purchase Programme (DGPP) also contributed to the deficit. The program involved the Bank of Ghana purchasing gold from domestic miners with local currency, adding to the nation’s foreign exchange reserves. In 2025, purchases increased significantly, helping Ghana achieve a current account surplus and bolstering international reserves. However, the upfront financing in local currency required substantial injections of liquidity, which then needed to be sterilized through high-interest bills, costing the central bank approximately GH¢9 billion in 2025. Despite this accounting cost, the program generated an equivalent of $11 billion in foreign exchange value for the state.
The Economic Dividends of Stabilization
The financial sacrifices made by the Bank of Ghana have yielded significant economic benefits for the nation.
The most critical outcome was the sharp decline in inflation. From a peak of 54 percent, inflation fell to 3.2 percent by March 2026, a near three-decade low. This stabilization of prices has restored purchasing power for citizens and enabled businesses to plan effectively.
Interest rates have also normalized, providing relief to the real economy. As inflation plummeted, the Bank of Ghana began cutting its Monetary Policy Rate. This led to a reduction in average lending rates for businesses, from 30.12 percent in February 2025 to 22.22 percent by October 2025, and the Ghana Reference Rate dropped from 29.72 percent to 17.86 percent over the same period. This easing of borrowing costs has supported private sector credit expansion and revitalized sectors like agriculture and manufacturing.
The economic stability fostered by the central bank’s actions has paved the way for growth. Real GDP grew by 6.3 percent year-over-year in the first half of 2025, with a projected full-year growth of 4.8 percent. The Ghana Stock Exchange Composite Index also saw substantial gains, reflecting renewed investor confidence.
Looking Ahead
The Bank of Ghana’s 2025 deficit, when viewed through the lens of central banking principles and the tangible economic improvements, represents the necessary price for achieving macroeconomic stability. The International Monetary Fund (IMF) has acknowledged Ghana’s “significant macroeconomic progress,” citing single-digit inflation and strengthening reserves as evidence of successful stabilization efforts. The coming year will be crucial in observing how the central bank sustains these gains, manages its balance sheet effectively, and continues to support sustainable economic growth while navigating potential global economic headwinds.
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