Bank of Ghana's 2025 Policy Solvency Calculation Flawed, Says Economist

A US-based Assistant Professor of Economics, Dr. Dennis Nsafoah, contends the Bank of Ghana’s (BoG) 2025 policy solvency calculation is problematic. He states that evaluating central banks solely on accounting losses is incorrect. Dr. Nsafoah highlights that the BoG’s presented GHS 5.50 billion policy solvency is misleading. This figure includes substantial one-time gains from gold sales.

Dr. Nsafoah, from Niagara University in New York, emphasizes that central banks are not profit-making entities. Their main tasks involve managing inflation, keeping the exchange rate stable, and maintaining trust in the currency. He explained that a central bank can incur accounting losses while still fulfilling its broader economic duties. Many central banks globally have experienced negative equity and accounting losses. Yet, they maintained effective monetary control and policy credibility during these periods.

This discussion fits into a broader debate about the BoG’s financial health. The central bank recently reported significant losses, prompting public concern. The BoG has shifted the conversation towards “policy solvency” rather than simple profitability. Policy solvency refers to a central bank’s ability to implement monetary policy credibly. This implementation must be consistent with achieving overall macroeconomic stability. Dr. Nsafoah agrees with this shift in focus. However, he questions the BoG’s specific application of this framework.

Dr. Nsafoah stated in an article, “Unlike private firms or commercial banks, central banks are not profit-maximising institutions. Their primary responsibilities include controlling inflation, preserving exchange rate stability and maintaining monetary credibility.” He further noted that accounting losses alone do not necessarily mean a central bank has failed in its policy objectives. Instead, he argued for evaluation based on “policy solvency”.

A closer look at the BoG’s reported 2025 operating income of GHS 22.23 billion reveals a flaw. A significant portion of this income, GHS 9.57 billion, came from net gains on gold sales. Dr. Nsafoah points out that these are one-time gains from selling reserve assets. He stressed that a central bank cannot continuously sell strategic reserve assets to fund ongoing monetary policy operations. Such sales are not recurring operational income.

Once these gold-sale gains are removed, the BoG’s adjusted recurring income for 2025 stands at GHS 12.66 billion. With an Open Market Operations (OMO) cost of GHS 16.73 billion, the revised policy solvency becomes negative GHS 4.07 billion. OMO costs involve buying or selling government securities to control the money supply. This revised figure, using the BoG’s own framework, suggests the institution is policy insolvent. This implies it cannot sustainably implement monetary policy without relying on non-recurring revenue sources.

Going forward, markets and policymakers will closely watch the BoG’s financial reporting. The central bank may need to provide clearer distinctions between recurring and non-recurring income sources. This will enhance transparency and strengthen its policy credibility. The discussion also highlights the importance of central bank independence and adequate capitalization. These factors ensure its capacity to achieve macroeconomic objectives without resorting to asset liquidation.