Finance Minister, Ken Ofori Atta has revealed that the government’s debt operations that commenced in 2022, has had a significant impact on Bank of Ghana’s balance sheet while reducing the amount of money spent on interest payment for the government.
He said as of 2022, the Central Bank held about GHS42.3b of government’s domestic debt, out of the total (domestic) debt stock of GHS194.3b in addition to others, resulted in a loss impairment provision of about GHS48b for the Bank in 2022.
“As indicated by the IMF, the BoG was the loss absorber for the debt exchange to ensure that in light of the concessions to other domestic bondholders, its burden share of the debt exchange will enable the economy to still achieve the overall objectives of the Exchange – the Domestic Debt Exchange Programme will ensure the NPV of the stock of public sector debt is halved from the then 105 percent of GDP (later recalculated as 89%) to 55 percent of GDP by 2028, thereby putting the country on a sustainable debt trajectory.”
Mr. Ofori-Atta in an article stated that as indicated by the Board of Directors of the Bank in their 2022 annual reports, all efforts will be made to restore the balance sheet of the Bank in the medium term, continue to improve the efficiency of their operations, and resort to the Government for recapitalization over the medium to long term if necessary.
He noted that there is, therefore, no need for a direct attack on the leadership of the Central Bank.
“As the Minister for Finance, I do have opinions about the reforms needed to strengthen the governance of many financial institutions including the Bank of Ghana. But this requires a positive and sober national debate on the governance structure; should we, for example, revisit a separate chairmanship and governorship (such was the case prior to governor Dr. Agama’s years) and whether our democracy and institutional experience support Governors playing both board leadership and management roles as enshrined in our laws.”
The Finance Minister continued: “We also need to have the discourse for policy clarity on what the operational independence of the central bank implies, especially in a Lower-Middle Income Country and transformational economies such as ours. I do personally believe that central banks must have independence in executing their monetary policy mandate especially if it is based on a price target, where the Government sets the price targets, and Central Banks, in our case, BoG, independently uses its operational tools to achieve it.”
He noted that “Governor Addison, just like me, has faced major economic hurdles since 2017, inheriting a derailed IMF programme and a highly impaired and ethically strained financial industry from our predecessors, having to navigate the serious revenue shocks on the back of Covid-19 and distortions to our supply chain induced by both Covid-19 and international geopolitics.”
The Finance Minister in resolving these, “we have all had to make sacrifices, and the BoG balance sheet was significantly affected.”’
Source: Kofi Yrenkyi