The Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has assuaged fears that the bank’s operations will be negatively affected due to its losses in 2022.
In its Annual Report and Financial Statements, the central bank revealed that it recorded a loss of GH¢60.8 billion in 2022.
The minority in parliament has called for the resignation of the BoG Governor alongside his two deputies over the bank’s “insolvency” and “mismanagement”.
But addressing the press on Monday, August 21, 2023, Dr Addison explained that his assertion that the loss will not affect the bank’s operation was validated by the International Monetary Fund’s Technical Assistance mission before granting the bailout.
“It is worth noting that central banks are not commercial banks. Bank of Ghana’s current financial condition will not impact negatively on the operations of the bank,” he stated.
He said the IMF declared the bank “was policy solvent and would remain so, as it had enough income to cover monetary policy operational costs.”
He added that the bank had sufficient capital amounting to about 15 per cent of its total liabilities at that time. Therefore, the IMF recommended that the bank retain all profits, and a reassessment should be made in 2027.
According to Dr Addison, BoG will also manage to reduce its operational costs during this period – 2023.
He further explained that the bank’s losses last year were technical losses arising from the “haircut and the application of accounting standard (in particular IFRS 9) to estimate credit losses over the tenure of the government dealt by Bank of Ghana.”
According to him, the financial loss was not money lost by the bank through its operations in 2022.
“Rather, one should look at this as the reflection of the total cost of the economic and social crises that the country has faced over the years and an attempt to resolve a major structural problem of the Ghanaian economy,” he added.
He added that the loss recorded by the bank was not the first time since the bank had gone into negative equity, according to historical financial statements.
“During the early years of structural adjustment, very large exchange rate depreciations led to revaluation losses that drove the bank into negative equity. Indeed, anytime the economy faces major challenges, the Bank of Ghana’s balance sheet suffers, and the equity position moves into negative territories,” he stressed.
The BoG Governor noted that in all its dealings, the bank acted within the applicable laws, adding that it was not true that the Bank of Ghana had been providing financing for the government every year.
“There has been zero financing in 2017, 2018, 2019 and 2021. The Bank of Ghana has only had to support in the pandemic year of 2020 and the crisis year of 2022.”
“The Bank of Ghana Act (612), as amended, limits financing of government to 5 per cent of the previous year’s tax revenue. This provision in the law has been adhered to since I took office in April 2017. Between 2017 and 2019, in addition to the requirements of the Bank of Ghana Act (612), as amended, the bank signed a memorandum of understanding (MOU) with the Ministry of Finance to even impose a tighter restriction of zero central bank financing, and this was observed strictly, even though MOUs are not legally binding. Between 2012 and 2015, the Bank of Ghana provided overdrafts to finance the government and Cocobod every year. And there was neither a pandemic nor a global economic crisis,” he explained.