The Director of the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana Professor Peter Quartey has explained what may have occasioned the decision by the Bank of Ghana (BoG) to support the government.
He stated that the central bank could not sit aloof for the economy crumble if the country is hit with a crisis. He however called for the regulation of the BoG when it comes to their decision to lend support to the government.
Prof Quartey further said that issues that resulted in the financial challenges that the BoG is facing should not be allowed to recur.
He attributed the problems to the government’s decision to borrow beyond the threshold.
Speaking to journalists at a post-mid-year budget review event held at the ISSER on Tuesday, August 8, Prof Quartey “Sometimes some of these things are done for good reason. When we put in laws and structures, it would help minimize but if we allow discretion and sometimes if we are hit the Bank cannot sit aloof and allow the economy to crumple it has to step in.
“So that is what the Bank is trying to do but I think what got us there, we shouldn’t allow that to happen again. For me, that is the key thing, we borrowed beyond the necessary threshold, we have learned our bitter lesson and we should not do that again,” he said.
A Professor at the University of Ghana Business School, Godfred Bokpin while sharing his views on the struggles of the BoG, said the Bank intentionally compromised its independence and sold its birthright to the government by exposing itself too much to provide financial assistance to the central government.
Prof Bokpin attributed the current financial difficulties that the central banks is facing to the over-exposure to the government.
He stated that the financial challenges that the central bank is facing are undermining confidence in the financial sector.
To him, the Governor, Dr Ernest Addison should have resigned by now.
“We are undermining confidence in our financial system. Remember the central bank could be policy solvent but that doesn’t restore total confidence in our system. If you look at what has happened to the banks, many of them have had to revise their line of credit in terms of corresponding banking in line with the outside
“In any serious society, I believe that maybe the Governor would have advised himself and resigned by now. Even though they find themselves in the situation, I think the central bank intentionally compromised its independence, sold its birthright to the government,” he said in an earlier recorded interview with Alfred Ocansey which was aired on the Ghana Tonight show on TV3 on Tuesday, August 8.
The Minority in Parliament has also demanded the resignation of the Governor and his two deputies – Dr Maxwell Opoku-Afari and Elsie Addo Awadzi.
This was after the Minority Leader Dr Cassiel Ato Forson said Dr Addison is spending $250million to build a new head office for the central bank at time the Bank is in financial difficulties.
Dr Forson accused the Governor of printing money to finance this project because the BoG has no money.
“The Bank of Ghana does not have money but spending GHS250million for a new head office, which means he is printing additional money to finance this project,” Dr Forson said.
He further gave the Governor and his two deputies up to 21 days starting today Tuesday, August 8 to resign after indicating that the governor just prints cash to support the government’s spending.
“We have to get this Governor out and let us have a new Governor. If we allow him to stay in the office, we will set bad precedence for future managers to do the same,” he said at a press conference in Accra on Tuesday, August 8.
Dr Forson stressed, “He has messed us so much that we cannot wait to see his back.”
“We demand the immediate resignation of the Governor and his deputies within 21 days. We will march to occupy the central bank to save the Bank of Ghana if he fails to reign. The March will ensure accountability,” he said.
Dr Forson’s comments follow the GHS60.8billion loss made by the BoG.
The Bank said this is due to the impairment of the Government of Ghana’s securities holdings of ¢48.45 billion, impairment of loans and advances granted to quasi-government and financial institutions amounting to ¢6.12 billion and the depreciation of the local currency resulting in net exchange loss of ¢5.27 billion.
The loss was occasioned by the Government of Ghana Domestic Debt Exchange Programme.
According to the BoG, its Board of Directors and Management assessed the policy solvency implications arising out of the negative net worth position and the group’s ability to continue to generate enough income to cover its monetary policy operations and other operational costs.
In the view of the directors, the Central Bank will continue to operate on a going concern basis due to a variety of factors underpinned by expectations of an improved macroeconomic situation and policy actions specifically targeted at improving its balance sheet.
In its Annual Report, the Central Bank, outlined these measures which it believed would help it recover.
These include: Retention of profits to help rebuild capital until equity firmly returns to positive region.
Refraining from monetary financing of the Government of Ghana’s budget. In this respect, action has already been taken with a Memorandum of Understanding on zero financing of the budget signed between the Bank of Ghana and the Ministry of Finance on 26 April, 2023;
Taking immediate steps to optimise the Bank of Ghana’s investment portfolio and operating cost mix to bolster efficiency and profits; and
Assessing the potential need for recapitalisation support by the government in the medium-to-long term
It furthered that the Board of Directors and Management are of the view that “continued efforts at restoring macroeconomic stability and debt sustainability in addition to long-term efforts at building reserves, provide enough basis for continued operational policy efficiency existence for the foreseeable future”.