The Bank of Ghana (BoG) says it will incur a loss of GH₵ 55.12Billion in 2022, largely as a result of the government’s Domestic Exchange Programme (DDEP).
The Central Bank explained that its non-marketable holdings of Government of Ghana instruments, such as long-term stocks, a COVID-19 Bond, and overdraft, had been reduced by 50%.
Furthermore, the Bank’s other claims (holdings of marketable instruments) were exchanged under similar terms as other financial institutions under the DDEP, resulting in a GH₵ 55.12Billion impairment in 2022.
Furthermore, due to exchange rate depreciation, the Bank incurred revaluation losses on its foreign assets and liabilities, resulting in a total loss of GH₵ 55.12Billion equity in 2022.
The Central Bank, on the other hand, stated that it would implement measures, including government support for recapitalisation, to ensure that equity was restored to a positive path by the end of 2027.
“The impairments and revaluation losses resulted in a negative equity position of GH₵ 55.12Billion for 2022,” Dr Ernest Addison, Governor of the Bank of Ghana, stated in the bank’s 2022 Annual Report and Financial Statements.
“The negative equity position was not the result of sub-optimal policy decisions but emanated from the restructuring of government debt and adverse market movements,” the Governor stated.
Dr. Addison announced that the Central Bank would implement a retention of profits policy to rebuild capital, as well as optimise its investment portfolio and operating cost mix to boost efficiency.
Again, the Bank would assess the potential need for government recapitalisation support in the medium term.
“The general expectation is that these policy measures will be implemented consistently in order to restore the Bank’s equity to positive territory by the end of 2027,” Dr Addison said.
Ghana’s economic growth slowed to 3.1% in 2022, down from 5.1% in 2021, due to weakened aggregate demand and supply shocks caused by the pandemic and geopolitical tensions.
Major global rating agencies downgraded Ghana’s sovereign credit because of concerns about fiscal policy implementation and debt sustainability, causing Ghana to lose access to the international capital market.
This, combined with low domestic revenue mobilisation, harmed the government’s ability to finance the budget, prompting the Central Bank to intervene to close the widened financing gap in order to avoid domestic debt default and a full-fledged economic crisis.
The Governor explained that the Central Bank provided regulatory relief to institutions that voluntarily participated in the DDEP in order to ensure financial sector stability.
The Capital Adequacy Ratio was reduced from 13.0 percent to 10%, the Common Equity Tier One capital ratio was reduced from 6.5 percent to 5.5 percent, and the maximum Tier Two capital ratio was increased from 2.0 percent to 3.0 percent of total risk-weighted assets.
Despite the loss, total banking assets increased by 22.9 percent to GHS220.90 billion, primarily due to increases in deposits.
Asset quality rose slightly to 15.1% in 2022, reflecting a strong rebound in credit growth that outpaced the rise in non-performing loan stock.
Broad and core liquidity indicators remained strong, with both exceeding historical averages.
According to the report, the Bank strengthened bank regulation and supervision and improved its Online Regulatory Analytic Surveillance System.
