- BoG underscores role of the DDEP in securing IMF bailout
- BoG's losses attributed to DDEP
- The impending MoU aims at restoring the central bank's financial health
Dr. Philip Abradu-Otoo, Director of Research at the Bank of Ghana (BoG), has clarified that securing a bailout from the International Monetary Fund (IMF) would have been difficult without implementing the Domestic Debt Exchange Programme (DDEP).
To stabilize the economy, the government initiated the IMF program and introduced the DDEP, resulting in some bondholders experiencing reduced investments and coupons.
In 2022, BoG reported a loss of GHS 60.9 billion due to impairments during the domestic debt exchange program.
In an interview, Dr. Abradu-Otoo highlighted the hurdles the government would have faced without the DDEP. He noted they would have had to reconsider other components of the DDEP.
Dr. Abradu-Otoo attributed BoG’s losses in 2022 to the domestic debt exchange program, particularly emphasizing the impairments suffered on the securities held by the bank.
He stated, “For the debt exchange program, nobody had a haircut on the principal… for BoG, we had the side haircut, top haircut, and the amount itself was cut into two. We had three, we had to do that because we needed that to secure the IMF program. It would have been tough to move forward very fast. Then we would have come back to the drawing board and relook at the other parts of the DDEP.”
When asked if BoG would have disagreed with the impairment if given the choice, he confirmed, “Yeah.”
A Memorandum of Understanding (MoU) for the early recapitalization of BoG is expected to be signed by the end of the third quarter of this year, following the Central Bank’s significant losses for two consecutive years.
The MoU is a strategic move to help restore the financial health of the central bank after it posted a GHS 10.5 billion loss in 2023 due to high expenditure related to monetary interventions and a GHS 60.9 billion loss in 2022 over impairments during the domestic debt exchange program.
The Ministry of Finance and BoG will sign the MoU to ensure the Central Bank can continue managing monetary policy and ensuring price stability.
