BoG attributes 30% reduction in inflation to GHS 8.3bn cost of Open Market Operations
The Bank of Ghana (BoG) has provided detailed insights into the costs associated with its open market operations, which significantly contributed to its reported losses in the audited 2023 financial statements.
The Central Bank recorded a loss of GH¢10.5 billion for the 2023 financial year, with GH¢8.3 billion attributed to these operations.
Bernard Otabil, the Director of Communications at the BoG, explained that these losses should not be misconstrued as an indication of ineffective policy. The bank’s primary mandate remains the maintenance of price stability, even at substantial short-term costs.
He highlighted the success in reducing headline inflation from 54.1% in December 2022 to 23.2% in December 2023, underscoring the long-term benefits of achieving low and stable inflation.
The increase in the cost of open market operations from GH¢1.7 billion in 2022 to GH¢8.3 billion in 2023 reflects the Central Bank’s intensified efforts to mop up excess liquidity and curb inflation.
“From December 2022 to December 2023, headline inflation decreased from 54.1% 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.
Despite the financial losses, these actions have bolstered the BoG’s credibility and commitment to its mission, which is crucial for fostering domestic and international confidence, attracting foreign investment, and maintaining favorable trade conditions.
Mr. Otabil emphasized that central banks are not profit-driven entities but are focused on national welfare. He noted that central banks can incur losses and still operate effectively without compromising their policy objectives.
He further noted that the BoG remains dedicated to its medium-term inflation target of 8 percent, allowing for a fluctuation margin of plus or minus 2 percentage points, to ensure the economic well-being of Ghanaians.
