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Governor Addison Outlines Why BoG Lost $3.6 Billion In Reserves



Dr. Ernest Addison, the governor of the Bank of Ghana (BoG), has provided an explanation for the reasons why the nation’s central bank lost $3.6 billion in reserves.

On Monday, January 30, he spoke at the 110th Monetary Policy Committee (MPC) press conference in Accra.

To that effect, he noted that the government was unable to access the global financial market to raise money the previous year.

However, the government also needed to make payments for crude oil, other expenses, and debt servicing.

Moreover, he iterated that the money required to make those payments were withdrawn from the BoG’s reserves, resulting in a $3.6 billion loss.

We have gone very far with the staff-level agreement [with the IMF]. We should hopefully be seeing the end of the domestic debt exchange. We are also making progress on the external side of the external debt restructuring, the necessary committees have all been formed,” he said.

In order to strengthen the reserves, Dr. Addison expressed confidence that the International Monetary Fund (IMF) will ratify Ghana’s agreement and begin disbursing funds by the end of the first quarter of this year.

“We are confident that by the end of the first quarter, we should be able to get the disbursements from the IMF to help augment the foreign exchange resources of the central bank.”

“The reason why the government had to announce a debt standstill is that we needed to conserve the foreign exchange that we had.”

Meanwhile, he went ahead to emphasize that,

A lot of people do not recognize that even though we were not able to go to the capital market in 2022, we continued to service our debts, we continued to pay for oil, and we continued to make other payments.

Where did we get those resources from? It came from the reserves of the central bank, that is why we lost 3.6bn dollars in reserves,” he added.

Dr. Addison went on to say that going forward, steps must be taken to fortify and stabilize the BOG reserve.

“What the debt standstill does is to sort of plug that leak, therefore going forward we do not expect to be losing reserves because of those types of payments at the rate at which we were losing reserves earlier.

“That also means that we should ensure that the central bank reserves is strengthed and stabilized over the next quarter or so, and then after the next quarter if these disbursements come through we should be able to start building reserves,” he iterated.

Dr.Ernest Addison stated that the central bank’s goal in regard to inflation is to lower it to a single digit, or 8%.

To that effect, he said,

“We try as much as possible to take policy decisions that will help bring inflation down.

In that context, the direction of inflation is not only going to be determined by policy rate but a whole lot of other factors including the macroeconomic framework which we have described.

If you look at the time frame we are looking at three to four years time frame, that is what the IMF program is designed to do,” he emphasized.

Within that time, we expect to bring down the rate to the Bank of Ghana’s single-digit target, plus or minus 2 percent, around the central point of 8 percent. This is really the objective of Monetary Policy over the next four to five years,” he added.

Additionally, he disclosed that the MPC has raised the policy rate to 28%, which was originally 27%.

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