Guardian or Casualty? How BoG paid the price for economic stabilisation

In Greek mythology, Atlas was the mighty Titan condemned to carry the weight of the heavens upon his shoulders for eternity. Ancient poets described him as a figure of enormous strength. In a cruel twist of irony, he was a tragic guardian whose suffering preserved the balance of the world itself. While humanity traded, celebrated and pursued prosperity beneath him, Atlas stood silently at the edge of existence, absorbing a burden few could fully comprehend. A bitter, inescapable irony, a haunting, zero-sum game: the one preserving stability gradually became weighed down by the very responsibility he carried. Let’s ponder over this line in mythology: at what point does the guardian himself become the casualty of the very stability he is tasked to protect?

The Anatomy of a GH¢15 billion Loss

The same paradox from the preceding lines is written in the ink of the newly published 2025 financial statements of the “titan” Bank of Ghana (BoG). Underneath the encouraging national story of easing inflation, relative exchange rate calm, improving investor confidence and declining Treasury bill rates lies a far more delicate institutional reality. The central bank that helped steady Ghana through one of its most turbulent economic periods now appears financially bruised by the stabilisation process itself. The reported GH¢15.6 billion (equivalent of $1.2 billion) loss for 2025, together with deepening negative equity, has triggered widespread public discussion over whether the BoG remains solely the guardian of economic stability or is beginning to absorb too much of the pain associated with preserving it.

On the surface, the contradiction is jarring and deeply unsettling. How can macroeconomic conditions improve while the balance sheet of the central bank deteriorates simultaneously? Central banking has never followed ordinary commercial logic.  Former United States Federal Reserve Chair, Paul Volcker, consistently maintained that central banks exist primarily to safeguard economic and financial stability rather than maximise profits.

The announcement that the BoG recorded an operating loss of approximately GH¢15.63 billion did not emerge from a single catastrophic transaction or isolated operational breakdown. It was rather the reflection of the cumulative effects of one of the most aggressive macroeconomic stabilisation cycles in Ghana’s recent history. According to the BoG’s own disclosures, sterilisation and liquidity management costs alone reached approximately GH¢16.73 billion in 2025 as the central bank intensified efforts to mop up excess liquidity and suppress inflationary pressures.

Additional pressure emerged from reserve valuation adjustments and the lingering financial effects of the Domestic Debt Exchange Program (DDEP). The BoG’s negative equity position reportedly deteriorated from about GH¢61.3 billion at the beginning of 2025 to roughly GH¢93.82 billion by year-end, illustrating the scale of balance sheet strain confronting the institution.

Why Central Bank Losses Do Not Necessarily Mean Policy Failure

The GH¢15.63 billion loss recorded by the BoG should not automatically be interpreted as evidence of policy failure. Central banks differ fundamentally from commercial institutions. As the Bank for International Settlements (BIS), Switzerland, notes, central banks can and often do operate with negative equity while successfully fulfilling their mandates, provided they maintain the public’s trust in their ability to manage money.

In fact, several major central banks across the world recorded historic losses following aggressive post-pandemic tightening cycles. Higher interest rates, liquidity absorption and exchange rate interventions increased operational costs for authorities globally.

The United States Federal Reserve reported a staggering operating loss of $114 billion in 2023, followed by $77.6 billion in 2024 and $18.7 billion in 2025. These losses were driven by paying higher interest on reserve balances to commercial banks while holding low-yield bonds.

The European Central Bank (ECB) recorded a loss of €7.9 billion in 2024, which followed its first loss in nearly two decades in 2023. The ECB noted these losses were the direct result of policy actions necessary to combat high inflation.

The Bank of England similarly faced billions in losses, requiring the United Kingdom Treasury to transfer funds to cover the shortfall under an indemnity agreement.

The primary mandate of a central bank is not profit maximization, but the preservation of macroeconomic stability. Authorities like the International Monetary Fund (IMF) emphasize that a central bank’s bottom line is secondary to its ability to control inflation and manage the exchange rate.

By 2025, Ghana’s inflationary pressures had moderated, and exchange rate volatility had eased, outcomes that represent the dividend of the BoG’s intervention. As Mervyn King, former Governor of the Bank of England, has argued, the price of stabilisation is often visible on the balance sheet, but the value is seen in the restored confidence of the wider economy.

A profitable central bank operating amid runaway inflation represents a far greater economic danger than a financially strained institution successfully restoring order. In periods of crisis, central bank balance sheets often absorb the economic adjustment costs. The losses reported by the BoG, much like those of the Fed and the ECB, demonstrate the cost of stabilisation rather than a failure of it.

Stability Is Never Free

Economic stabilisation is often discussed as though it were an abstract policy objective detached from institutional sacrifice. In reality, stabilisation carries real financial costs and during periods of severe macroeconomic turbulence, those costs are frequently transferred onto the balance sheet of the central bank itself. Nobel laureate, Milton Friedman famously posited that there is no such thing as a free lunch, a principle that applies poignantly to the fiscal costs of monetary tightening.

Ghana’s recent inflation crisis demanded an aggressive policy response. Inflationary pressures had become deeply entrenched, the Ghana Cedi had experienced severe depreciation pressures and investor confidence had weakened considerably. Under such circumstances, the BoG had little room for passivity. Monetary tightening became unavoidable.

Higher policy rates were introduced to suppress inflationary demand and solidify expectations. However, elevated policy rates also increased the central bank’s own interest expenses, particularly through liquidity sterilisation operations. In attempting to absorb excess liquidity from the banking system, the BoG incurred interest-related costs estimated at over GH¢16 billion in 2025 alone. As Claudio Borio, Head of the Monetary and Economic Department at the BIS, Switzerland, has observed, the remuneration of excess reserves in a high-rate environment inherently creates a significant income drain for central banks, often leading to accounting losses in the pursuit of price stability.

Exchange rate defence further compounded the burden. Defending currency stability in an environment of external vulnerability typically requires reserve deployment, market interventions and confidence management. These interventions carry a formidable overhead. The BoG also reported reserve-related valuation losses estimated at approximately GH¢8.3 billion. This figure is also a reflection of exchange rate movements and adjustments in the Ghana Cedi-equivalent value of foreign reserve assets.

Ironically, some of the very policies that imposed financial strain on the BoG also contributed to visible macroeconomic improvements. Inflationary momentum moderated during the year, while Ghana’s gross international reserves reportedly recovered to the equivalent of about four and a half months of import cover, compared with the severe depletion experienced during the height of the crisis period.

This is the paradox of modern crisis-era central banking. Former IMF Chief Economist, Raghuram Rajan, has long argued that successful stabilisation efforts can sometimes impose financial strain on central banks themselves. Inflation may decline, exchange rate pressures may moderate and market confidence may gradually improve. The irony is that the very institution engineering that stabilisation may emerge financially weakened.

The public often sees only the losses. What is less visible is the alternative scenario policymakers were attempting to avoid: runaway inflation, accelerated currency collapse, financial instability and a deeper erosion of economic confidence. Stabilisation therefore becomes a trade-off between immediate institutional financial pain and potentially wider systemic collapse. Harvard University economist Carmen Reinhart has repeatedly observed in her sovereign debt research that during periods of economic crisis, public institutions often absorb hidden financial scars long before broader macroeconomic stability fully returns.

GoldBod, Gold Reserves and the Expanding Burden of Stabilisation

Central banks are traditionally designed to function as monetary authorities rather than broad national development financing institutions. During periods of severe economic distress, however, those boundaries often begin to blur. Ghana’s recent experience demonstrates how rapidly a central bank can evolve from a guardian of monetary stability into a broader stabilisation platform for the state itself. Christine Lagarde, President of the European Central Bank (ECB), has repeatedly argued that modern central banks increasingly operate in what she describes as an era of “polycrisis,” where monetary authorities are often compelled to move beyond traditional inflation management to preserve broader financial stability.

In recent years, the BoG increasingly found itself supporting interventions linked to reserve accumulation, foreign exchange stabilisation and domestic gold purchases. The financing arrangements associated with GoldBod became one of the clearest examples of this expanding burden. GoldBod’s own audited financial statements reportedly showed liabilities exceeding GH¢3.78 billion payable to the BoG under the Domestic Gold Purchase Program (DGPP) by the end of 2025.

The strategic merit of this move is hard to dispute. Ghana’s gold reserves reportedly increased from approximately 30.53 tonnes in January, 2025 to more than 38 tonnes by October, 2025, strengthening reserve buffers and improving foreign exchange retention within the domestic economy. Supporters of the intervention therefore argue that the programme contributed meaningfully to macroeconomic stabilisation during a fragile period.

However, interventions of this nature inevitably carry financial consequences. Public disclosures surrounding the DGPP suggest cumulative losses exceeding GH¢7 billion between 2022 and 2024. Liquidity support, reserve accumulation and exchange rate management collectively constricted the financial maneuvering room on BoG’s balance sheet at a time when sterilisation costs were already surging.

The situation became even more delicate amid reports that the BoG liquidated part of its gold reserves in 2025, reportedly generating realised gains estimated at about GH¢9.57 billion. On one hand, this move showed pragmatic reserve management during a difficult stabilisation cycle. Mohamed El-Erian, President of Queens’ College, Cambridge and former Chief Executive of Pacific Investment Management Company (PIMCO) has often argued that reserve assets are more than just a comfort blanket for the balance sheet; they are a strategic war chest to be tapped when the economic weather turns foul. On the other hand, the liquidation of the gold reserves threw into sharp relief the intensity of the pressures confronting the institution. When strategic reserve assets begin cushioning operational strain, the line between prudent crisis management and institutional exhaustion becomes increasingly thin.

This is the difficult reality of modern crisis-era central banking. During turbulent periods, central banks often become the economy’s ultimate shock absorbers, carrying responsibilities extending far beyond orthodox monetary policy. The challenge, however, lies in ensuring that extraordinary interventions adopted during periods of crisis do not gradually become permanent institutional burdens.

Like Atlas in Greek mythology, the guardian may succeed in preserving stability for others while slowly absorbing the weight of that responsibility itself.

Who Guards the Guardian?

The BoG’s financial deterioration fundamentally raises questions extending beyond accounting losses alone. It forces a broader national conversation about governance, institutional safeguards and the future resilience of monetary policy administration in Ghana.

If central banks are expected to absorb extraordinary stabilisation burdens during crises, then transparency and operational independence become even more essential. Raghuram Rajan, former Governor of the Reserve Bank of India, has frequently argued that central banks in emerging markets must be independent within the government, but not independent of the government. This means focusing on deeper structural questions. How much quasi-fiscal responsibility should a central bank carry? What limits should govern strategic interventions?

These questions are not unique to Ghana. Former Federal Reserve Chair, Ben Bernanke’s crisis-era interventions during the 2008 global financial crisis demonstrated how central banks can gradually become the economy’s principal stabilisation machinery when fiscal and market systems come under severe strain.

Ultimately, as Eswar Prasad of Cornell University and the Brookings Institution suggests, the credibility of a central bank depends not only on its ability to intervene, but on the strength of the institutional frameworks that protect it from excessive political and financial strain. For Ghana, the challenge ahead is a delicate balancing act and a sobering trade-off: preserving macroeconomic stability while simultaneously safeguarding the long-term institutional health of the very guardian tasked with maintaining it.

Atlas, Exhaustion and the Price of Economic Survival

In the end, the BoG’s 2025 losses may come to represent more than a difficult financial episode. They may symbolise the hidden institutional cost of stabilising an economy during one of its most turbulent periods in recent history.

The irony is difficult to ignore. As inflation moderated, exchange rate pressures eased and confidence gradually returned, the balance sheet of the institution leading that stabilisation effort weakened considerably. The guardian helped steady the economy but absorbed much of the strain associated with preserving that stability.

This is why the debate surrounding the BoG must remain balanced and intellectually honest. The losses deserve scrutiny, transparency and accountability. However, they should also be understood within the broader context of crisis-era economic management, where central banks often become the first line of defence against systemic instability.

Atlas did not weaken because he lacked strength. He weakened because he carried burdens no single institution was ever meant to bear indefinitely. Perhaps, that is the deeper lesson emerging from the BoG’s financial statements: economic survival sometimes comes at a price, and occasionally, the guardian himself pays part of the cost.

Sources

Bank for International Settlements. (2024). Central Bank Capital and Trust in Money. BIS Papers No. 146.

Bank of Ghana. (2025). Official Gold Reserve Holdings Update.

Bank of Ghana. (2026). 2025 Financial Statements: Questions & Answers.

Bank of Ghana. (2026). Domestic Gold Purchase Programme (DGPP): Cumulative Performance Report 2022-2024.

Bank of Ghana. (2026). Report and Financial Statements: 31 December 2025.

Ben Bernanke. (2015). The Courage to Act: A Memoir of a Crisis and Its Aftermath. W. W. Norton & Company.

Carmen Reinhart. (2009). This Time Is Different: Eight Centuries of Financial Folly. Princeton University Press.

Christine Lagarde. (2024). Central Banking in an Age of Polycrisis. ECB Press.

Claudio Borio. (2023). Getting Up from the Floor. BIS Speech.

Eswar Prasad. (2023). The Future of Money. Harvard University Press.

European Central Bank. (2025). Annual Report 2024: Financial Statements and Policy Operations.

Federal Reserve System. (2026). Annual Report to Congress: Financial Results and Open Market Operations.

GoldBod. (2026). Audited Financial Statements for the Year Ended 31 December 2025.

International Monetary Fund. (2023). Central Bank Transparency and Policy Effectiveness. IMF Policy Papers.

Mervyn King. (2016). The End of Alchemy: Money, Banking and the Future of the Global Economy. W. W. Norton & Company.

Milton Friedman. (1975). There’s No Such Thing as a Free Lunch. Open Court Publishing.

Mohamed El-Erian. (2023). Selected public commentaries and interviews on reserve deployment, crisis management and financial stabilisation.

Raghuram Rajan. (2010). Fault Lines: How Hidden Fractures Still Threaten the World Economy. Princeton University Press.

Volcker, P. A., & Gyohten, T. (1992). Changing Fortunes: The World’s Money and the Threat to American Leadership. Times Books.

By: Dr. Akwasi Agyeman Britwum

 Economist | Chartered Accountant | Banker

| Lead Consultant and Founder, Acuity Benchmark |

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