Claim:
A social media post made by a user on X (formerly Twitter) @scottbolshevik claims that the Bank of Ghana (BoG) has been a loss-making entity for the last six years.
Verdict:
The claim is INACCURATE
EXPLANATION:
Over the last ten years, from 2014 to 2023, the Bank of Ghana’s financial performance has shown a mix of profits and losses. The most significant losses were incurred in 2022, primarily due to the Domestic Debt Exchange Programme (DDEP). However, there were also other factors that influenced these results, such as the adoption of stringent financial reporting standards, liquidity support provided to failed banks, and efforts to maintain economic stability.
Additionally, the BoG has argued that central banks are not profit-oriented institutions and often make losses in the pursuit of their mandate to ensure economic stability and control inflation.
A review of the Bank of Ghana’s financial performance from 2014 to 2023 reveals a nuanced picture as the financial data shows periods of both profits and losses over the past ten years:
Profit/Loss for the year (‘000 GHS):
• 2014: Profit GH¢ 899,353.00
• 2015: Profit GH¢ 1,020,037.00
• 2016: Profit GH¢ 709,482.00
• 2017: Loss GH¢ 1,637,532.00
• 2018: Loss GH¢ 793,085.00
• 2019: Profit GH¢ 1,800,906.00
• 2020: Profit GH¢ 1,572,794.00
• 2021: Profit GH¢ 1,236,861.00
• 2022: Loss GH¢ 60,809,753.00
• 2023: Loss GH¢ 10,548,510.00
Key factors influencing financial performance:
1. Adoption of IFRS Standards:
In 2018, BoG fully adopted the International Financial Reporting Standards (IFRS), which impacted the treatment of impairments in the balance sheet. The implementation of IFRS 9, in particular, changed the way impairment provisioning was recorded, leading to a negative impact on the financial results. Data prior to 2018 was based on weaker IFRS standards.
2. Liquidity Support:
During the erstwhile John Dramani Mahama administration, the BoG provided significant liquidity support to insolvent banks. The impairment of these liquidity support funds adversely affected the financial performance of BoG in 2017 and 2018.
No liquidity support has been provided to banks under the current regime.
In 2017 and 2018, the Bank made losses due to impairments.
3. Central Bank Mandate:
Unlike commercial banks, central banks prioritize public good over profit. The primary mandate of BoG is to maintain price stability and ensure overall economic stability and this often involves incurring losses.
For instance, in 2023, BoG spent over GH¢8 billion on Open Market Operations to control inflation, which peaked at 54.1% at the end of 2022.
This aggressive liquidity management contributed significantly to the reported loss of over GH¢10 billion in the 2023 financial statements. However, this action helped reduce inflation to 23.2% by the end of 2023.
Domestic Debt Exchange Programme
In 2022, the government’s DDEP impacted the Central Bank’s balance sheet. The Bank of Ghana incurred a significant loss in order to prevent the economy from collapsing and to ensure that the government secures an IMF programme in response to the economic challenges.
Conclusion:
The claim that the BoG has been a loss-making entity for the past six years is therefore inaccurate.
ghanaweb.com
