The Bank of Ghana (BoG) has clarified the cost incurred on its open market operations, which contributed largely to the Central Bank’s loss position in the audited 2023 financial statements.
The cost of the Bank of Ghana’s (BoG) open market operations has been made clear; this expense was a major factor in the Central Bank’s losing position in the financial accounts for 2023 that were audited.
The Central Bank’s annual report and financial accounts show that open market activities cost GH¢8.3 billion, so that the 2023 financial year ended with a GH¢10.5 billion loss overall.
Bernard Otabil, the BoG’s director of communications, stated that while the bank is still dedicated to using monetary policy tools to maintain a stable inflation in accordance with its primary price stability mandate, the loss does not signal a loss of policy efficacy.
“First, central banks pursue national welfare and not profits”, Mr. Otabil said, adding: “From December 2022 to December 2023, headline inflation decreased from 54.1% to 23.2 percent and that has come with a huge cost. However, the long term benefits of low and stable inflation always outweigh the costs incurred in the short term to bring it down”.
“Compared to the GH¢1.7 billion cost of open market operations in 2022, the almost fivefold increase in mopping up liquidity from the economy to reduce inflation is significant”, Mr Otabil explained.
He continued, “Central banks can make losses, get into negative accounting equity and function completely successfully. Therefore, central banks are not expected to compromise policy objective to report handsome profit.”
“Our strong actions to control inflation reinforce our credibility and commitment to our mission. Showing that we can effectively manage inflation, boosts confidence both domestically and internationally. This trust is vital for attracting foreign investment and maintaining favorable trade conditions,” the BoG Director of Communications noted.
The Bank of Ghana highlighted that pursuing policies targeted at reaching a steady level of inflation in line with its medium-term target of 8 percent is the Bank’s primary mandate.
Nonetheless, the central bank stated that it will accept variations in inflation of plus or minus two percentage points from this medium-term objective.
The BoG came to the conclusion that it is still dedicated to both the welfare of all Ghanaians and its duty of price stability.