BoG Is Solid- Deputy Finance Minister Rubbishes NDC Claims

John Ampontuah Kumah, a deputy finance minister has confuted assertions that Ghana’s Central Bank has collapsed and run bankrupt.

The assertion was made by the National Democratic Congress (NDC) during a press conference on Tuesday, August 8, 2023.

“The Bank has also recorded a negative equity of over GHS55.1 billion. What this simply means is that the Bank of Ghana is insolvent. In other words, the once prestigious Bank of Ghana, the mother of all banks in Ghana, has been bankrupted and collapsed by this NPP economic management team led by Dr Mahamudu Bawumia with the complicity of the Governor of the Central Bank,” Minority leader in Parliament Cassiel Ato Forson said in reference to the 2022 Annual Report and Financial Statements.

The report among other things revealed the BoG lost GHC 60.8 billion.

But John Kumah argues the Bank is solid.

“It’s not true that a recapitalization levy is to be introduced for BoG, the Central Bank hasn’t collapsed. The main source of income to the Bank is from government transactions i.e. fees on all government transfers, the bank’s investments in marketable instruments and also earnings from non-marketable holdings of the Bank. Given that government transactions have gone down, naturally, the income of the bank will go down. Also, because of the debt restructuring, earnings on their holdings on marketable and non-marketable bonds will go down.

“Beyond this, the Bank is solid and is capable of performing its core function. Article 183 clause 2 (c) of the 1992 constitution enjoins the Bank of Ghana to promote and encourage economic development in the country, hence there is nothing untoward in the actions of the Central Bank to support the state in its economic recovery efforts,” he said in a Facebook post.

Central Bank Losses Not Unusual
Hon Kumah who is also the Member of Parliament for Ejisu Constituency in the post held that losses by the Central Banks are nothing new or unusual.

“It is important to further highlight that a negative balance sheet by a Central Bank is not unusual, in fact, most Central Banks around the world run negative balances to achieve the overall economic anchor objectives of a Central Bank. History clearly illustrates this. Several central banks had negative equity yet fully met their objectives – for example, the central banks of Chile, Czechia, Israel and Mexico experienced years of negative capital. But throughout, financial and price stability were maintained.” – Bank For International Settlements Bulletin No.68.

“According to Nordstrom and Vredin (2022), a central bank’s credibility depends on its ability to achieve its mandates. Losses do not jeopardise that ability and are sometimes the price to pay for achieving its aims. Such propaganda and unnecessary attacks at the central bank only result in increased market volatility, panic selling of assets, and can trigger a chain of events that can affect our overall economic stability.”