BoG’s decision to halve Government debt averts collapse of Ghana’s economy, earns international praise
The Bank of Ghana’s recent decision to slash government debt by 50 per cent has been hailed as a decisive action that saved the country from potential economic collapse and garnered approval from external partners.
Dr. Philip Abradu-Otoo, Director of Research at BoG, emphasized that the central bank’s bold move has sent a positive signal to international observers, who were closely scrutinizing the situation before embarking on their own debt management strategies.
“By taking the lead in absorbing losses, the Bank of Ghana has set an example for external partners. Their eagerness to witness the outcome has been answered, and this will undoubtedly expedite their own debt treatments,” stated Dr. Abradu-Otoo.
The BoG’s proactive stance in shouldering the burden of losses is expected to expedite the process of resolving the nation’s debt situation, potentially easing concerns among investors and financial institutions.
Notably, the Bank of Ghana faced a substantial loss of GHS55.12 billion in 2022, primarily attributed to the implementation of the Domestic Exchange Programme (DDEP). This program involved a 50 per cent reduction in non-marketable government instruments held by the central bank.
Other financial institutions were also subjected to comparable terms during the exchange of marketable instruments, leading to an impairment of GHS48.40 billion.
Furthermore, the central bank incurred additional losses due to foreign asset revaluations, influenced by exchange rate fluctuations. Despite these challenges, the Bank of Ghana remains steadfast in its commitment to maintaining policy solvency, managing inflation, and ensuring financial stability.
To address the losses incurred, the Bank of Ghana is taking proactive measures, including government support for recapitalization, with the goal of restoring positive equity by the end of 2027.
The Bank of Ghana’s swift and decisive action has not only rescued the nation from the brink of an economic crisis but has also impressed the international community, instilling confidence in Ghana’s ability to navigate its debt challenges.
As the debt resolution process gains momentum, the central bank’s leadership is set to play a pivotal role in guiding the country towards financial stability and sustained growth. Investors and stakeholders alike are closely observing the developments as Ghana forges ahead in its journey towards fiscal recovery.
