When a central bank makes a loss, the public deserves answers. But it also deserves the right answers. The Bank of Ghana’s 2025 losses should not be treated as if a commercial bank had failed.
They reflect policy operations undertaken in the difficult task of restoring price stability, rebuilding reserves and stabilising the cedi. But neither should the losses be waved away.
They raise important questions about open market operations, the gold purchase programme, fiscal backing, recapitalisation and the politics of central bank independence.
Ghana must scrutinise the Bank of Ghana without weakening it, and demand accountability without turning monetary policy into partisan warfare.
The publication of the Bank of Ghana’s 2025 financial statements has reopened one of the most sensitive debates in Ghana’s economic management: what does it mean when a central bank makes a loss?
For many citizens, the instinctive reaction is understandable. If a private company makes large losses, we worry about mismanagement.
If a commercial bank records deep negative equity, we worry about solvency, depositors and possible failure.
So, when the Bank of Ghana reports an operating loss of GH¢15.63 billion, a further Other Comprehensive Income loss of GH¢19.32 billion, and negative equity widening to GH¢96.28 billion, the public is entitled to ask hard questions.
But the first duty of analysis is to ask the right question.
The question is not simply whether the Bank of Ghana made a loss. It did. The deeper question is what the loss represents. Was it the cost of restoring macroeconomic stability?
Was it the result of avoidable policy weaknesses? Was it efficiently incurred? Was it transparently explained?
And how will it be managed without undermining the independence and credibility of the central bank?
These are not partisan questions.
They are national questions. And precisely because they are national questions, they should not be turned into partisan weapons.
A central bank is not a commercial bank
The Bank of Ghana should not be judged in the same way as a commercial bank or a private firm. A private firm exists to generate profit for its owners.
A commercial bank exists to intermediate funds, protect depositors and generate returns for shareholders. If either repeatedly loses money, its survival may be threatened.
A central bank is different. It exists to protect the value of money, maintain price stability, safeguard the financial system, manage foreign reserves and act as banker to the state and the banking system. Its success is not measured primarily by profit.
Its success is measured by whether inflation is contained, the currency is stable, reserves are adequate, the payment system works, and the public retains confidence in money.
Put simply, a commercial bank makes money for shareholders.
A central bank protects money for the country.
The Bank for International Settlements makes this point clearly.
Central banks are public institutions with policy mandates, not profit-maximising firms. Its analysis of recent central bank losses argues that losses and negative equity do not directly prevent a central bank from operating effectively, and that central banks should be judged by whether they fulfil their mandates in normal times and in crises.
That does not mean central bank losses do not matter. They do. Losses can weaken the central bank’s balance sheet, create future fiscal costs, complicate relations with the Ministry of Finance, and expose the institution to political attack. But central bank losses are not the same as commercial losses. A central bank can record a financial loss while still fulfilling its mandate.
That distinction is crucial for understanding the Bank of Ghana’s 2025 results.
Can a central bank go broke?
The economist Willem Buiter once asked a provocative question: can central banks go broke? His answer is useful for Ghana today.
A central bank is not like a private firm or a commercial bank. It issues the currency, earns seigniorage, and normally has fiscal backing from the state. For that reason, negative accounting equity does not automatically mean that a central bank is insolvent.
But Buiter’s argument also warns against complacency. A central bank’s true financial strength cannot be judged only by its conventional balance sheet.
What matters is its broader economic position: its current assets and liabilities, but also the present value of future seigniorage income, future operating costs, and future transfers to or from the fiscal authority.
This distinction matters greatly for the Bank of Ghana. The fact that Bank of Ghana has negative equity does not, by itself, mean that it is bankrupt in the commercial sense.
A central bank can continue to operate with negative equity if it retains public confidence, has the legal authority to issue money, can generate future income, and has credible fiscal backing from the Government of Ghana through the Ministry of Finance.
But neither should the losses be dismissed.
If policy costs remain high, if future income is insufficient, if seigniorage is constrained by the need to keep inflation low, or if recapitalisation from the Ministry of Finance is delayed or uncertain, central bank losses can become a real fiscal and credibility problem.
This is the middle ground Ghana needs.
The Bank of Ghana should not be treated as a failed commercial bank. But its balance sheet cannot be ignored. The right question is not whether the Bank of Ghana is “broke” in the ordinary business sense.
The right question is whether its losses are temporary, whether future income can repair its balance sheet, whether the Ministry of Finance has a credible recapitalisation plan, and whether the process can be managed without reigniting inflation or weakening monetary independence.
What the Bank of Ghana says happened
The Bank of Ghana’s explanation is straightforward. It argues that its 2025 financial results reflect the cost of stabilisation. According to the Bank, the losses were driven mainly by three traceable policy costs: open market operations, the Domestic Gold Purchase Programme, and foreign exchange revaluation effects.
The Bank says the operating loss was primarily driven by the cost of open market operations, which were used to absorb excess cedi liquidity from the banking system, and by the cost of the Domestic Gold Purchase Programme, which helped build Ghana’s reserves.
The OCI loss reflected the impact of the sharp appreciation of the cedi on the cedi value of the Bank’s foreign currency assets.
In its official communication, the Bank of Ghana has presented the story as one of sacrifice for stability. It points to the fact that inflation fell from 23.8 per cent at end December 2024 to 5.4 per cent at end December 2025.
It notes that the cedi appreciated significantly, gross international reserves increased from US$9.11 billion to US$13.83 billion, public debt declined from 61.8 per cent of GDP to 45.3 per cent, and real private sector credit recovered.
This is the Bank of Ghana’s central argument: the financial cost is visible on the Bank’s balance sheet, while the economic benefits are visible in lower inflation, a stronger currency, improved reserves and better credit conditions.
There is merit in this explanation. A central bank that fights inflation can incur losses. If it issues its own bills to absorb excess liquidity, it must pay interest on those instruments. If it holds large foreign assets and the domestic currency appreciates, the local currency value of those assets falls. If it builds reserves through a domestic gold purchase arrangement, the mechanics of acquisition, pricing and accounting may create costs.
The Bank of Ghana is therefore right to say that the losses should not be interpreted as if the institution were a failed commercial bank.
But that does not end the matter.
How was inflation reduced?
The Bank of Ghana’s explanation suggests that inflation was reduced through a combination of channels, not through one instrument alone.
First, the Bank tightened monetary conditions at the beginning of the year to anchor expectations.
This matters because inflation is not only about current prices.
It is also about what firms, workers, importers and traders expect future prices to be.
If people believe inflation will remain high, they price goods and contracts accordingly.
A credible central bank must therefore persuade the public that inflation will fall.
Second, the Bank absorbed excess cedi liquidity through open market operations. In simple terms, it issued short term instruments to pull liquidity out of the banking system.
Banks bought those instruments, and the Bank paid interest on them. According to the Bank’s own explanation, the cost of OMO was GH¢16.73 billion in 2025 and was the principal driver of the operating loss.
Third, liquidity absorption helped reduce pressure on the foreign exchange market. In Ghana, excess cedi liquidity can quickly become demand for dollars.
When many people and institutions move from cedis into dollars, the cedi weakens.
A weaker cedi then raises the domestic price of imported food, fuel, medicine, machinery and other essential goods. Inflation follows through the exchange rate channel.
Fourth, the gold programme and reserve accumulation helped strengthen confidence in the cedi. The Bank’s reserves increased significantly in dollar terms. A stronger reserve position reassures markets that the country has external buffers. That confidence can support the currency, and a stronger currency can reduce imported inflation.
Fifth, the cedi appreciated sharply. This appears to have been one of the most important disinflationary channels. A stronger cedi reduces the domestic currency cost of imports and eases inflationary pressures across the economy.
So, the Bank’s inflation story is not simply “we raised interest rates, and inflation fell”. It is more complex. The Bank fought inflation through liquidity absorption, exchange rate stabilisation, reserve accumulation, confidence effects and expectations management.
That is a defensible stabilisation story. But it also raises a deeper question: was inflation reduced in a way that strengthens the productive economy, or was it reduced mainly by restraining liquidity and strengthening the cedi while the private sector remained credit constrained?
