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BusinessBoG to stop some operations owing to GHC60bn loss - IEA Director

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BoG to stop some operations owing to GHC60bn loss – IEA Director

Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwakye, has criticized the characterization by New Patriotic Party flagbearer Dr. Mahamudu Bawumia of the GH¢60.81 billion losses posted by the Bank of Ghana for the year 2022 as merely “technical losses.”

According to the economic researcher, these losses will inevitably result in cuts to essential operations of the Bank as it seeks to mitigate costs.

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In a piece titled “Dr. Bawumia’s Speech: Turning an Impossibility into the Possibility?”, Dr. Kwakye highlighted the immediate effects of these losses, particularly noting the fluctuating inflationary figures experienced by the country.

“Dr. Bawumia said BoG’s action was responsible and that it was temporary, as the Bank had advanced money to Government in only two of the past seven years. The Minister of Finance had expressed similar sentiments in the past, which was not surprising because Government was the direct beneficiary of the monetary financing.

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“However, as central bankers, we know that the most inflationary source of financing the budget is high-powered money coming directly from the central bank vault. It is not the fact that BoG advanced money to Government that is the issue, for the Bank’s Act provides for such advances up to 5% of the previous year’s revenue. It is the magnitude of the advance—over 50% of the previous year’s revenue—that is disturbing. It is no wonder inflation peaked at 54.1% in 2022—and depreciation ballooned to 54.2% in November 2022, before falling bank to 30.0% in December 2022. Meanwhile, as Government debt to BoG was also discounted under the DDEP, the Bank made a whopping loss of GHS61 billion and a record negative equity of GHS54 billion in 2022.”

Dr. Kwakye contended that despite attempts by Finance Minister Ken Ofori-Atta and the Bank of Ghana to downplay the significance of the loss, the country’s balance sheet has been significantly affected.

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“Both the Minister and the Governor seem to have played down the loss as only a technical loss. However, the fact is that the Bank’s balance sheet has been severely impacted, and this would force it to cut back on some of its important operations so as to save costs.”

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