An Economist who is also a Banking Consultant Dr Kojo Aboagye-Debrah has said that the Bank of Ghana (BoG) will have to undertake capital restoration following the loss it incurred.
The restoration process, he intimated, should be supervised by Parliament to ensure sanity, stability, and confidence.
This will be the appropriate thing to do by the central bank in order to avert the losses it incurred, he said.
“Parliament should step in and supervise the restoration of capital. If we do that there will be sanity, there was ability and there will be confidence. There are other issues in terms of the separation of functions.
“Bank of Ghana is operating our treasury functions and policy functions. I think with time we need to look at some of these. For now, we need a transition in terms of a supervisory role for the restoration of capital because the Bank of Ghana mandates now, given the opinion of the auditors, I think it will be appropriate in their own sense to ask a third party to step in transitional, that does not mean we are taking their independence away. ” he said on the Business Focus on TV3 Monday, July 31 while reacting to reports on the BoG’s GHS60.8billion loss.
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 Bank of Ghana recorded GHS60.6billion loss in 2022.
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 optimis 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”.