BoG’s $1.25bn Loss Exposes High Cost of Gold Strategy – Bright Simons Explains

Ghana’s central bank is paying a steep financial price for stabilising the cedi and rebuilding reserves, according to Vice President of IMANI Africa, Bright Simons.

His analysis follows the release of the Bank of Ghana’s 2025 audited financial statements, which revealed a net loss of $1.25 billion and a total comprehensive loss of $2.8 billion. The figures have intensified debate over the sustainability of the central bank’s operations, particularly as cumulative negative equity widened to an estimated $9 billion.

Mounting Losses Amid Record Reserves

The losses come despite a significant buildup in Ghana’s foreign reserves, which rose to $13.8 billion by end-2025, largely driven by the Bank’s aggressive gold purchasing programme.

Mr Simons notes that while the strategy has delivered key macroeconomic gains, including a stronger currency and easing inflation pressures, it has also created a costly financial cycle within the central bank’s balance sheet.

How the System Works

Breaking down the mechanics, he explains that the Bank effectively creates cedis to purchase gold from local producers, often through aggregators linked to the Ghana Gold Board.

The gold is then refined and sold on international markets for dollars, boosting foreign reserves and strengthening the country’s external position.

However, the process injects large volumes of cedis into the economy, raising the risk of inflation.

To counter this, the central bank issues short-term instruments, known as open market operation bills, to mop up excess liquidity from commercial banks.

The Cost of Stability

According to Mr Simons, this sterilisation process comes at a high cost. In 2025 alone, the Bank paid approximately $1.34 billion in interest to commercial banks to absorb the liquidity it had created.

This exceeded its total income from operations, which stood at about $1.78 billion, contributing significantly to the overall loss.

Additional costs, including operating expenses and losses associated with the gold programme, pushed total expenditure to over $3 billion.

“The gap between what the Bank earns and what it spends to stabilise the system is what ultimately drives the losses,” he explained.

A Growing Structural Challenge

The result is a deepening negative equity position, which has nearly doubled within a year. Mr Simons describes this as one of the largest such positions among central banks globally, raising questions about long-term sustainability if the cycle continues.

He emphasises that while the strategy achieves its core objectives, stabilising the currency and building reserves, it does so at a financial cost that consistently outweighs returns.

In Plain Language

In simple terms, Mr Simons says, the central bank is running a three-step cycle: it prints cedis to buy gold, sells the gold for dollars to build reserves, and then borrows back the cedis at high interest to prevent inflation.

“The operation works in achieving stability, but it is expensive. The cost of borrowing back the money is higher than the income the Bank generates,” he explained.

Balancing Stability and Sustainability

The analysis highlights a key policy dilemma. Ghana’s recent macroeconomic gains are tied to a strategy that is financially burdensome for the central bank.

For policymakers, the challenge going forward will be how to sustain currency stability and reserve growth without deepening losses or further weakening the Bank’s balance sheet.

As Mr Simons’ breakdown suggests, the question is no longer whether the strategy works, but whether it can be maintained at its current cost.