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Bank of Ghana Prevents Economic Collapse by Taking 50% Haircut and Absorbing DDEP Shocks

The Bank of Ghana’s decision to cut government debt by 50 percent has been praised for averting economic collapse and impressing external partners.

Dr. Philip Abradu-Otoo, Director of Research at BoG, emphasized that the bank’s action sends a positive signal to international observers who were closely monitoring the situation before committing to their own debt treatments. This move by BoG is expected to expedite the debt resolution process, as external partners also need to undergo debt treatment.

The BoG experienced a substantial loss of GHS 55.12 billion in 2022, mainly due to the Domestic Exchange Programme (DDEP), which involved a 50 percent reduction in non-marketable government instruments held by the bank. Comparable terms were applied to the exchange of marketable instruments held by other financial institutions, resulting in an impairment of GHS 48.40 billion.

In addition to these challenges, losses were incurred due to revaluations of foreign assets caused by exchange rate fluctuations. Nonetheless, the Central Bank remains committed to maintaining policy solvency, managing inflation, and ensuring financial stability.

Measures, including government support for recapitalization, are expected to restore equity by the end of 2027.

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