The Bank of Ghana has explained, through a frequently-asked-questions (FAQs) post on its website, that a huge chunk (₵53.1 billion) of the ₵60.8 billion loss it posted in 2022, per its audited accounts, was a direct result of three items that were badly affected by the government's Domestic Debt Exchange Programme (DDEP).
The DDEP, together with an external debt restructuring programme, was critical for securing the US$3-billion extended credit facility from the International Monetary Fund to salvage Ghana's tottering economy.
Explaining the factors that drove the loss, the central bank said: "The main reason for this huge loss is the impairment of the holding of marketable government stocks and non-marketable instruments of government" which were both being held in its books.
"This stock of government instruments has been built over the years", the bank noted.
In addition, the central bank said its "exposure to [Ghana Cocoa Board] COCOBOD, which has been built over the years, was also impaired" by the DDEP.
"The holdings of government instruments and COCOBOD exposures were all part of the perimeter of the debt exchange", BoG indicated, adding: "Whereas all other stakeholders that participated in the Domestic Debt Exchange Programme (DDEP) did not have principal haircuts, but rather had new instruments with new tenors and coupon structure, the BoG served as the loss absorber to the entire debt exchange programme, a key requirement that allowed the Government of Ghana to meet the threshold for the approval of the IMF programme".
"As a result, the BoG had to take on a 50 per cent principal haircut on the total principal (which stood at ₵64.5 billion at the time of the exchange)", the bank pointed out. "Consequently, BoG had new instruments with extended tenor and significantly reduced coupon", it added.
The central bank revealed that applying the full requirements of IFRS 9, meant that "from the principal alone, a 50 per cent haircut on the non-marketables amounted to a loss of ₵32.3 billion".
It said the "impairment from exposure to COCOBOD also amounted to ₵4.7 billion". "These three DDEP items (i.e. marketable, non-marketable and COCOBOD) accounted for ₵53.1 billion out of the total loss of ₵60.8 billion for 2022", BoG computed.
"In addition to these three items, price and exchange rate valuation effects accounted for ₵5.2 billion of the total loss, whereas interest expense on cost of monetary policy operation accounted for ₵3.3 billion".
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