Senior Economist and Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwakye, has criticized the NPP flagbearer, Dr. Mahamudu Bawumia for describing the GH¢60.81 billion losses incurred by the Bank of Ghana in 2022 as a technical one.

In a write up published by Dr. Kwakye, he pointed that the losses posted by the Central Bank in the said financial year will significantly result in cuts imposed on some of its operations.

The IEA Director stressed that these losses were already manifesting in the current economic conditions in the country such as the 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 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,” he said.

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 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 GH¢61 billion and a record negative equity of GH¢54 billion in 2022.”

He further argued that despite the Finance Minister and Central Bank Governor downplaying the magnitude of the losses incurred, the country’s balance sheet was brutally impacted .

“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,” Dr Kwakye said.

MA/NOQ