BoG must not become loss-making machine – Gideon Boako - BusinessGhana

Ghana's Bank of Ghana (BoG) faces a critical institutional crossroads. Recent financial performance has raised alarm among policymakers and market analysts, with prominent economist Gideon Boako warning that the central bank cannot continue operating as a loss-making entity without compromising its core monetary policy mandate and financial independence.

The BoG's deteriorating balance sheet reflects a combination of structural pressures: currency depreciation of the Ghanaian cedi, elevated domestic interest rates, and legacy losses from foreign exchange interventions. When a central bank sustains operating deficits year after year, it erodes its capital buffer—the financial cushion that underpins credibility in currency markets and allows independent monetary decision-making.

## Why Central Bank Losses Matter for Ghana's Economy

Central bank profitability is not merely an accounting concern; it directly affects monetary policy autonomy. A financially weakened BoG faces political pressure to generate revenue through unconventional means—printing money, excessive seigniorage, or asset sales at unfavorable terms. Each option risks inflation or undermines the institution's independence. Boako's intervention signals growing concern that Ghana's central bank could become captive to fiscal pressures rather than guided by inflation-targeting mandates.

The cedi's persistent weakness amplifies BoG losses. Foreign currency liabilities (foreign reserves held on the balance sheet) lose local-currency value as the cedi depreciates. Simultaneously, the central bank's domestic credit portfolio—loans to the government and banking system—grows in nominal terms but weakens in real terms if inflation outpaces returns. This dynamic trapped many African central banks during the 2022–2024 tightening cycle.

## What Investors Should Watch

Market participants track central bank capital adequacy closely. A weakened BoG may struggle to defend the cedi during future currency crises, raising the cost of hedging for importers and foreign investors. Conversely, if the BoG is forced into fiscal dependency, inflation expectations could re-anchor upward, pressuring government bond yields and equity valuations.

Boako's public warning suggests conversations are underway about recapitalization—where the government injects capital to restore the BoG's balance sheet. Ghana attempted this in 2022 with IMF support, but structural losses have persisted. Without addressing root causes (cedi stability, interest rate management, reserve adequacy), fresh capital merely delays the reckoning.

## The Path Forward

The BoG must pursue a multi-pronged approach: strengthen the cedi through disciplined monetary policy and foreign reserve accumulation, negotiate debt restructuring to reduce domestic interest burdens, and improve operational efficiency to cut administrative costs. The government, for its part, must resist the temptation to raid central bank profits for budgetary relief—a practice that has destabilized central banks across sub-Saharan Africa.

Ghana's IMF program (approved in 2023) includes provisions to monitor central bank health, but implementation lags. Investors should monitor quarterly BoG financial statements and any announcements regarding capital measures. A loss-making central bank is not inevitable; it is a policy choice.

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