Persistent Negative Equity of BoG Threatens Fight Against Inflation & Price Stability – Dr.  Atuahene

The Bank of Ghana (BoG) may have recorded marginal gains in its equity position, but analysts say the persistent equity position is still a serious threat to the core mandate of the Central Bank.

Banking consultant and financial analyst, Dr. Richmond Atuahene, is raising a red flag over the situation, fearing that it could severely undermine the central bank’s core monetary policy functions, including inflation targeting and Open Market Operations (OMO).

A bank’s equity position is the difference between its total assets and total liabilities. It shows the bank’s net worth or its financial strength. A positive equity means the bank owns more than it owes, while negative equity means its liabilities exceed its assets, which can undermine its stability and ability to operate effectively.

Currently, per the latest 2024 financial performance of the Central Bank, the  BoG’s equity position stands at negative GH¢61.32 billion from negative GH¢65.34 billion in 2023 marking marginal gains.

The bank was thrown into this distress in 2022 as a result of the Debt Exchange Program, where a significant amount of its bonds held by the government and COCOBOD were written off, eroding the capital of the apex Bank.

Although the bank has been experiencing marginal improvement in the last two years, Dr. Atuahene emphasizes that the impact of the negative equity is a major financial weakness and remains acute, posing a direct threat to its ability to execute essential monetary interventions.

He explains to The High Street Journal, the bank requires capital to be able to effectively intervene in the market to tame inflation and price stability. However, considering the lack of adequate capital of the bank, he insists that the bank’s narrative of being policy solvent cannot be entirely true.

“OMO operations alone it is an activity that the Bank of Ghana has to do. It’s a must. But if you don’t have assets, and when I say assets, I mean, if you don’t have bonds, you don’t have enough bonds, it means that you cannot participate very well,” he explained.

Open Market Operations, a key tool used by central banks to control money supply and stabilize inflation, typically require a strong balance sheet. According to Dr. Atuahene, the BoG’s asset base was significantly. The BoG now holds an insufficient volume of marketable securities, making it nearly impossible to intervene effectively in the financial system.

The Bank of Ghana has no money for inflation targeting. Because that is the only way you want to take money out of this, and bring money into the system. So this operation is going to be tough for them,” he feared.

Dr. Atuahene’s remarks echo growing concerns among economists and financial observers about the sustainability of the BoG’s operations.

The central bank has recorded negative equity for multiple consecutive years, raising questions about its independence, credibility, and ability to manage monetary policy in a crisis-prone economy. In his view, a central bank cannot consistently operate with negative capital.

The comments come at a time when inflation remains a pressing concern for Ghana’s economy. Without strong tools to manage liquidity, some fear the BoG may lose grip over price stability, one of its most critical mandates.

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