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NewsBoG's GH¢60.81bn loss to trigger cuts in essential operations - John Kwakye


BoG’s GH¢60.81bn loss to trigger cuts in essential operations – John Kwakye

The Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwakye, has voiced criticism against the New Patriotic Party flagbearer, Dr. Mahamudu Bawumia, for characterizing the GH¢60.81 billion losses reported by the Bank of Ghana in 2022 as merely technical losses.

The economic researcher contends that these losses will necessitate reductions in crucial operations of the Bank as it seeks to manage costs.

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In an article titled “Dr. Bawumia’s Speech: Turning an Impossibility into the Possibility?”, Dr. Kwakye pointed out that one immediate consequence of these losses is the fluctuating inflationary figures witnessed in the country.

Dr. Kwakye disputed Dr. Bawumia’s assertion that the Bank of Ghana’s actions were responsible and temporary.

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“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.

“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.”

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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.”

He highlighted that while it is not unusual for the Bank to advance money to the government, the magnitude of the advance—exceeding 50% of the previous year’s revenue—is concerning.

This, according to Dr. Kwakye, contributed to the spike in inflation and depreciation in 2022.

Despite attempts by the Finance Minister, Ken Ofor-Atta, and the Bank of Ghana to downplay the losses as technical, Dr. Kwakye emphasized that the Bank’s balance sheet has been significantly impacted. He argued that this impact would compel the Bank to scale back on crucial operations in order to cut costs.

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