BoG pays price for disinflation with deeper losses

The Bank of Ghana posted a GH¢15.6 billion loss in 2025, laying bare the financial cost of its forceful effort to restore macroeconomic stability after years of crisis-driven policy tightening.

Audited accounts show the loss widened sharply from GH¢9.49 billion in 2024, while negative equity deepened to GH¢93.82 billion from GH¢58.62 billion.

On the face of it, the central bank’s balance sheet has weakened significantly, weighed down by the cumulative cost of sterilisation and liquidity management operations.

Yet, in policy terms, the picture is more nuanced.

The bank has, by most measures, delivered on its core mandate: bringing inflation under control and re-anchoring expectations.

Inflation fell steeply from 23.8 per cent in 2024 to 5.4 per cent by end-2025, before easing further to 3.2 per cent in March 2026 — slipping below the bank’s medium-term target band.

The pace of disinflation marks a decisive break from the volatility that followed Ghana’s post-pandemic economic shock, and signals a return to more predictable pricing conditions for households and businesses alike.

The effects are beginning to show across the economy. Lower inflation has helped to steady the cedi, reduced volatility in domestic money markets and eased pressure on borrowing costs.

In turn, this has started to reopen credit channels to the private sector, with tentative signs of a pickup in lending as confidence gradually returns to the financial system.

That progress, however, has come at a steep and highly visible cost. Spending on open market operations nearly doubled to GH¢16.73 billion, driven by the interest expense incurred in mopping up excess liquidity through central bank bills and repo operations.

These tools, while essential to tightening monetary conditions, have effectively shifted the burden of adjustment onto the bank’s own balance sheet.

What emerges is a familiar, if uncomfortable, central banking dynamic: policy success accompanied by financial strain.

By aggressively withdrawing liquidity and maintaining a tight stance, the bank curtailed second-round inflationary pressures.

But, in doing so, it accumulated significant quasi-fiscal costs that have eroded its capital position.

Statutory mandate

Under the central bank’s statutory mandate, profitability is not the primary objective.

The 2025 financial results, therefore, illustrate a classic trade-off faced by central banks, particularly in emerging markets: weakened capital buffers in exchange for restored macroeconomic credibility and policy traction.

In that sense, the losses are less a sign of failure than a reflection of the intensity of the policy response required.

The question now is one of durability. With inflation back within — and even below — the target range, attention is turning to whether these gains can be sustained without incurring further heavy balance sheet costs.

Much will depend on how quickly liquidity conditions normalise, as well as the alignment of fiscal policy and the resilience of external buffers.

Over the medium term, the challenge will be how the Bank of Ghana rebuilds its capital position without undermining the hard-won gains on inflation.

That could involve retaining future earnings, restructuring elements of the balance sheet, or potentially some form of recapitalisation support.

For now, the accounts tell a clear story: stability has been restored — but the price has been substantial.