30% reduction in inflation results in a cost of GH¢8.3bn on BoG's open market operations

The Bank of Ghana (BoG) has clarified the cost incurred on its open market operations, which contributed largely to the Bank’s loss position in the audited 2023 financial statements.

According to the Central Bank's annual report and financial statements, there was a cost of GH¢8.3 billion on open market operations, resulting in an overall loss of GH¢10.5 billion for the 2023 financial year.

Director of Communications at the BoG, Mr. Bernard Otabil said the loss does not indicate a loss of policy effectiveness, as the bank remains committed to deploying monetary policy tools to maintain a stable inflation in line with its primary price stability mandate.

"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.”

“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.

The Bank of Ghana reiterated that its core mandate is to pursue policies aimed at achieving a stable level of inflation in line with its medium-term target of 8 percent.

The apex bank, however, mentioned that it will tolerate inflation fluctuations of plus/minus 2 percentage points of this medium-term target.

The BoG concluded that it remains committed to its price stability mandate and the well-being of all Ghanaians.

NOQ

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