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BusinessDr. Kwakye blasts BoG, Finance Minister and Bawumia for disregarding GH¢60.81 billion...


Dr. Kwakye blasts BoG, Finance Minister and Bawumia for disregarding GH¢60.81 billion loss in 2022

Senior Economist and Director of Research at the Institute of Economic Affairs (IEA) Dr. John Kwakye, has voiced criticism against the NPP flagbearer, Dr. Mahamudu Bawumia, for characterising the GH¢60.81 billion losses incurred by the Bank of Ghana in 2022 as merely “technical.”

In a published write-up, Dr. Kwakye emphasised that these significant losses reported by the Central Bank during the specified financial year would inevitably lead to cuts imposed on various operations.

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Highlighting the tangible impacts, the IEA Director underscored how these losses are already affecting prevailing economic conditions in the country, including exchange rate stability and inflationary pressures.

“Dr. Bawumia said BoG’s action was responsible and that it was temporary, as the bank had advanced money to the 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 the government was the direct beneficiary of the monetary financing,” he said.

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Dr Kwakye continued, “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 the 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 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 GH¢61 billion and a record negative equity of GH¢54 billion in 2022.”

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He further contended that despite attempts by the Finance Minister and Central Bank Governor to downplay the extent of the losses, the country’s balance sheet suffered a severe blow.

“Both the Minister and the Governor seem to have played down the loss as only a technical one. 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,” Dr Kwakye said.

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