The Bank of Ghana (BoG) is still struggling to convince Ghanaians o the costs associated with its open market operations, which significantly contributed to the Bank’s loss position in the audited 2023 financial statements.
According to the Central Bank’s annual report and financial statements, the cost of open market operations was GH¢8.3 billion, leading to an overall loss of GH¢10.5 billion for the 2023 financial year.
Open Market Operations (OMO) is a central bank’s tool for influencing the money supply and managing interest rates in an economy.
Despite this huge expenses, leading rates in Ghana still is outrageously high running between 35% to 50%, one of the highest on the Africa continent.
Director of Communications at the BoG, Mr. Bernard Otabil, explained that the loss does not reflect a loss of policy effectiveness.
“First, central banks pursue national welfare and not profits”, Otabil said, adding: “From December 2022 to December 2023, headline inflation decreased from 54.1 percent to 23.2 percent and that has come with a huge cost. However, the long-term benefits of low and stable inflation always outweigh the costs incurred in the short term to bring it down”.
“Compared to the GH¢1.7 billion cost of open market operations in 2022, the almost fivefold increase in mopping up liquidity from the economy to reduce inflation is significant”, Mr Otabil explained.
He continued, “Central banks can make losses, get into negative accounting equity and function completely successfully. Therefore, central banks are not expected to compromise policy objectives to report handsome profit.”
Mr Otabil noted that compared to the GH¢1.7 billion cost of open market operations in 2022, the nearly fivefold increase in efforts to reduce inflation by mopping up liquidity from the economy is substantial.
“Our strong actions to control inflation reinforce our credibility and commitment to our mission. Showing that we can effectively manage inflation, boosts confidence both domestically and internationally. This trust is vital for attracting foreign investment and maintaining favourable trade conditions,” the BoG Director of Communications noted.