The Bank of Ghana, the country’s central bank, has reported a loss of 60.8 billion Ghana cedis for the year 2022. This is a significant decrease compared to the 1.2 billion cedis profit it made in 2021.
The bank attributes this loss to various factors, including the impact of the Domestic Debt Exchange Programme and impairment of some assets.
Reasons for the Loss
The Bank of Ghana’s loss can be attributed to several factors, including:
- The Domestic Debt Exchange Programme, which led to impairment of government securities holdings.
- Impairment of loans and advances granted to quasi-government and financial institutions.
- Depreciation of the local currency, resulting in a net exchange loss.
Assessing the Situation
The Bank of Ghana’s Board of Directors and Management have evaluated the implications of the negative net worth position and the bank’s ability to generate enough income to cover its operations. Despite the loss, they believe that the bank will continue to operate and improve its financial situation in the future.
Measures for Recovery
To aid in its recovery, the Bank of Ghana has outlined several measures, including:
- Retaining profits to rebuild capital.
- Avoiding monetary financing of the government’s budget.
- Optimizing the bank’s investment portfolio and operating costs.
- Considering the potential need for recapitalization support from the government.
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Impact on Commercial Banks
All 23 commercial banks in Ghana participated in the Domestic Debt Exchange Programme. The Bank of Ghana conducted stress tests on these banks, which revealed potential risks to their solvency, liquidity, and profitability. To manage these risks, the bank introduced policy and regulatory reliefs for the participating banks.
Enhanced Supervision
The Bank of Ghana has enhanced its supervisory surveillance systems for banks. Banks are now required to report more frequently, providing balance sheet and liquidity reports. Additional reporting requirements have been developed to monitor the performance of the new bonds issued through the debt exchange.
Gold Purchase Program
The Bank of Ghana has implemented a Gold Purchase program to increase its foreign reserves. It purchases refined gold from certified domestic mining firms using local currency. The purchased gold is then stored with offshore custodians and becomes part of the bank’s reserves.
Despite the significant loss, the Bank of Ghana remains optimistic about its future. It is taking measures to recover and improve its financial situation. The bank is also implementing policies to minimize the impact of the debt exchange on the financial sector and ensure stability.
