Bank of Ghana incurred huge losses in 2022 due to DDEP – Report

The Bank of Ghana incurred a significant loss in 2022 largely as a result of the DDEP, its 2022 Annual Report, and Financial Statement have said.

According to the report, the central bank’s holdings of government debt were restructured whereas non-marketable holdings of Government of Ghana instruments including long-term stocks, a Covid-19 Bond, and overdrafts were subjected to a 50 percent haircut.

Bank of Ghana’s other claims (holdings of marketable instruments) were exchanged under similar terms as other financial institutions under the DDEP.

This led to an impairment of GH¢48.40 billion in 2022.

At the same time, the Central Bank incurred revaluation losses on its foreign assets and liabilities due to exchange rate depreciation. The impairments and revaluation losses led to a negative equity position of GH¢55.12 billion for 2022.

The report also stated that despite a healthy trade surplus, the balance of payments recorded a deficit of US$3.64 billion on account of significant net outflows in the capital and financial account.

This led to a drawdown of US$3.46 billion in Gross International Reserves from US$9.70 billion at end-December 2021 to US$6.24 billion at end-December 2022, providing 2.7 months of import cover.

The significant drawdown in reserves triggered immense currency pressures and the reduction in the Common Equity Tier 1 capital ratio to 5.5 percent, from 6.5 percent, and an increase in the maximum Tier 2 capital ratio to 3.0 percent, from 2.0 percent of total risk-weighted assets.

The Bank of Ghana has stated that it will put in place policy measures to restore the equity of the Bank, including:
• Retention of profits to rebuild capital;
• Optimisation of the Bank’s investment portfolio and operating cost mix to bolster efficiency; and
• An assessment of the potential need for recapitalisation support by the government in the medium term.

“The broad expectation is for steadfast implementation of these policy measures to restore the Bank’s equity to positive territories by the end of 2027,” the report stated.

SSD/NOQ