BoG’s 2025 losses stabilised economy – Prof. Ebo Turkson

Ghana's central bank absorbed significant operational losses in 2025 as part of a deliberate macroeconomic stabilisation strategy, according to economist Prof. Ebo Turkson. The Bank of Ghana (BoG) prioritised currency and inflation management over near-term profitability—a trade-off that appears to have prevented deeper economic deterioration as the nation navigated its IMF Extended Credit Facility programme.

The cedi faced sustained depreciation pressure throughout 2024–2025, driven by persistent foreign exchange shortages, elevated import demands, and capital outflows from emerging market volatility. Rather than allow the currency to free-fall, the BoG deployed foreign reserves strategically and accepted operational losses to maintain exchange rate stability. This approach contrasts sharply with laissez-faire regimes where central banks sit passively while currencies collapse.

### ## Why Did BoG Accept Losses to Stabilise the Economy?

A depreciating currency triggers cascading damage: import prices spike, pushing inflation higher; businesses delay investment; and ordinary Ghanaians lose purchasing power. By intervening—even at a cost to the BoG's balance sheet—the central bank prevented an inflationary spiral that would have eroded real wages and destabilised the entire financial system. Prof. Turkson's analysis suggests that short-term central bank losses were the price of long-term macroeconomic stability, a lesson many African central banks are learning.

The BoG's 2025 losses also reflected the reality of monetary policy under IMF conditionality. Ghana's programme required tighter money supply and higher interest rates to combat inflation—policies that compressed demand, reduced government revenue from economic activity, and put pressure on banks' profitability. The central bank, as the lender of last resort, absorbed some of this pain through its own P&L.

### ## What Impact Did This Have on Inflation and Interest Rates?

Ghana's inflation rate, which peaked above 54% in late 2024, began moderating in early 2025 as the BoG's hawkish stance took hold. While inflation remained elevated, the trajectory shifted downward—critical psychological and practical relief for households and businesses. Policy rates held firm at elevated levels, making borrowing expensive but reducing speculative currency attacks.

This environment created mixed signals for investors. On one hand, high real interest rates offered attractive treasury yields for offshore investors willing to hold cedi-denominated assets. On the other, elevated borrowing costs dampened credit growth and corporate profitability, pressuring equity valuations on the Ghana Stock Exchange. Manufacturing and construction stocks, highly leveraged sectors, saw headwinds.

### ## How Does This Affect Investor Confidence?

The BoG's willingness to absorb losses signals institutional credibility—the central bank will defend its mandate even at a fiscal cost. This matters enormously in emerging markets where central bank independence is often questioned. Investors, both local and international, observe whether the BoG prioritises inflation control or political pressure to ease policy prematurely. Prof. Turkson's framing suggests the BoG passed this credibility test in 2025.

However, sustainability questions linger. If the BoG's capital erosion continues, it may eventually constrain its ability to intervene. Renewed IMF talks and fiscal discipline from government will be essential to prevent a return to currency instability by late 2025 or 2026.

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