Bank of Ghana (BoG) says it has incurred a loss of GH¢55.12 billion in 2022, largely as a result of the government’s Domestic Exchange Programme (DDEP).

The Central Bank explained that its non-marketable holdings of Government of Ghana instruments including long-term stocks, a COVID-19 Bond, and overdraft were subjected to a 50 percent haircut.

Also, the Bank’s other claims (holdings of marketable instruments) were exchanged under similar terms as other financial institutions under the DDEP, leading to an impairment of GHS48.40 billion in 2022.

In addition, the Bank incurred revaluation losses on its foreign assets and liabilities due to exchange rate depreciation, leading to a total loss of GHS55.12bn equity in 2022.

However, the Central Bank said it would implement measures, including the government’s support for recapitalization to ensure that equity was restored to a positive path by the end of 2027.

“The impairments and revaluation losses led to a negative equity position of GHS55.12bn for 2022,” Dr Ernest Addison Governor, BoG said in the Bank’s 2022 Annual Report and Financial Statements.

“The negative equity position was not the result of sub-optimal policy decisions but emanated from the restructuring of government debt and adverse market movements,” the Governor stated.

To restore the equity of the Bank, Dr Addison announced that the Central Bank would implement a retention of profits policy to rebuild capital, optimise its investment portfolio and operate a cost mix to bolster efficiency.

Again, the Bank would have an assessment of the potential need for recapitalization 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,” Dr Addison said.

Ghana recorded a slowdown in economic growth to 3.1 per cent in 2022, from 5.1 per cent in 2021, on the back of weakened aggregate demand and supply shocks arising from the effects of the pandemic and geopolitical tensions.

There were sovereign credit downgrades by major global rating agencies over fiscal policy implementation and debt sustainability concerns, making Ghana lose access to the international capital market.

That, together with low domestic revenue mobilisation, negatively impacted government’s ability to finance the budget, hence, the Central Bank’s intervention to close the widened financing gap to avert domestic debt default and a full-blown economic crisis.

The Governor explained that the Central Bank offered regulatory reliefs to institutions that voluntarily participated in the DDEP to safeguard stability of the financial sector.

Those reliefs included a reduction in the Capital Adequacy Ratio to 10.0 per cent, from 13.0 per cent, a reduction in the Common Equity Tier One capital ratio to 5.5 per cent, from 6.5 per cent, and an increase in the maximum Tier Two capital ratio to 3.0 per cent, from 2.0 per cent of total risk-weighted assets.

Despite the loss, total assets of the banking industry grew by 22.9 per cent to GHS220.90 billion, mainly funded by growth in deposits.

Asset quality improved slightly to 15.1 per cent in 2022, reflecting a strong pickup in credit growth, which outpaced the growth in the non-performing loan stock.

Liquidity indicators remained sound, with broad and core liquidity measures surpassing historical averages.

The Bank strengthened regulation and supervision of banks and enhanced its Online Regulatory Analytic Surveillance System, the report indicated.