The Bank of Ghana (BoG) has maintained that it did not print “fresh cash” in 2021 and 2022 to finance government’s expenditure.

This follows new allegations that the Central Bank printed ¢77.6 billion for government, which was written off, and replaced with a 15-year bond.

The Director of Research at the Bank of Ghana, Dr. Philip Abradu-Otoo disclosed this when he appeared on PM Express Business Edition, on August 3, 2023 with host George Wiafe. 

https://www.youtube.com/watch?v=DKT2ezCGgdo

“The Bank of Ghana has a lot of resources that  it can fall on to support its operations and government’s expenditure. We do not even need to go ahead to print cash and spend”, Dr. Abradu-Otoo insisted.

“We do have reserves offshore, and with correspondent banks, investment in US Treasury. We also trade in gold and currencies that the bank relies on to support its operations “, he added.

He explained that the Bank of Ghana financed government expenditure from its resources but did not print new money.

Recovering the loss

On its financial performance, the Bank of Ghana ended 2022, with a loss of ¢60.85 billion.

In the previous year, it made a profit of ¢1.2 billion. 

There have been concerns that the loss was recorded as a result of fresh expenditure by government in 2022.

Mr. Abradu-Otoo however challenged the assertion, saying that the bonds that have been impacted by the Domestic Debt  Exchange Programme, can be described as “Legacy Government Papers and Transactions” which dates back to 1992 .

“I would have been worried if this challenge was reoccurring. But rather I want to describe it as a one off event. We are hopeful we will turn things around quickly”, he said.

He added that “structures and actions have been identified to help return the bank to positive equity.

During that period, it is expected that the bank will continue to remain policy solvent and discharge its mandate effectively”.

 Citing challenges times across the world, Dr. Abradu-Otoo said major banks are struggling and are being recapitalized by by governments to save depositors money.

“If it had not been the Domestic Debt Exchange Programme, the loss position of the bank will not have been that bad”, he said

Justification of previous profits by Bank of Ghana

The Bank of Ghana in 2021 paid dividend to government and ploughed back some into its operations.

Even though some people have suggested that the loss could affect the banks mandate of ensuring financial stability, Dr. Abradu-Otoo argued that though profit is desirable the central bank does not always have to make profit to support economic growth.

“We also need this profits, to support the Bank of Ghana’s operation, especially when it comes to our Monetary Policy mandate like checking inflation”.

According to him, the law enjoins the Bank of Ghana to pay dividend to the government when it makes profit.

“The Central Bank may have to work to build back the loss or recover it” the director revealed.

Bank of Ghana’s mandate

Dr. Abradu-Otoo further assured that despite their current negative equity position, the function of the Bank of Ghana will not be affected.

He disclosed that some of the measures implemented bybthe Bank of Ghana are already yielding results.

He is hopeful the Bank of Ghana’s equity and earning will be strong in the long run.

Justification for policy rate hike

There have been criticisms about Bank of Ghana’s Inflation Targeting Policy and whether it has really helped to reduce general Levels of prices of goods and services.

However, Dr. Abradu-Otoo insisted that the monetary policy measures has helped to reduced inflation to the current level.

“We should not forget that significant strides have been made when to reduce inflation”.

“When you look at Non Food Inflation from  the beginning  of the year ,  where Monetary Policy impact the most, it has declined by 16 percent.”  Dr. Abradu-Otoo said.