GHC 60b loss was due to absorption of DDEP haircuts – BOG

The Bank of Ghana has affirmed that the GHC 60 billion loss it posted for 2022 was a result of the impairment of the holdings of marketable and non-marketable government securities of the government of Ghana.

The BOG said that it served as the ultimate absorber of the government’s securities in the Domestic Debt Exchange programme which was a necessary pre-condition for the IMF bailout.

“The holdings of Government instruments and COCOBOD were all part of the perimeter of the debt exchange. Whereas all other stakeholders who participated in the Domestic Debt Exchange (DDEP) did not have principal haircuts but rather had new instruments with new tenors and coupon structures, the BoG served as the loss absorber to the entire debt exchange programme, a key requirement necessary that allowed the Government of Ghana to meet the required threshold for the for the approval of the IMF programme”, the Bank said in an FAQ statement on Tuesday.

“As a result, the BoG had to take on 50% of the principal haircut of the total principal (which stood at GHC 64.5 billion at the time of the exchange). Consequently, BoG has issued new instruments with an extended tenor and a significantly reduced coupon,” the statement added.

The Central Bank noted that the application of the accounting standard IFRS 9 to the treatments resulted in a total impairment of GHC 53.1 billion from marketable and non-marketable securities and exposures to COCOBOD.

Additionally, the BOG attributed losses of GHC 5.2 billion and GHC 3.3 billion to price and exchange rate valuation and interest expense on the cost of monetary policy operations, respectively.