By Francis OWUSU-ACHAMPONG, FCIB
Hard policy choices versus personal vendetta
The past few weeks have witnessed a series of topical issues in the media relating to the fortunes of the Bank of Ghana. “Bank of Ghana is broke”, “Bank of Ghana is bankrupt”, “Bank of Ghana requires recapitalisation”, Further demonstrations being planned against Bank of Ghana Governor and his deputies” have been high profile banner headlines in the media landscape.
Democracy, it has been said, is a very expensive governance choice made even more catastrophic when a section of the media hijacks issues for public consumption without critical analyses, but with the assurance that a mass of the people can easily be swayed by sentiments, however mischievous, misguided or ill-informed in a highly polarised political environment.
Amid these headlines and various interpretations attached to them by commentators of all hue and cry, I sat in my village debating whether the apparently fouled economic atmosphere should be sanitised or people should be left with their somewhat unsubstantiated or exaggerated views based on sectional or individual partisan interests.
Rightly or wrongly, this writer finds it hard to disassociate some of the sources of the wild speculations from the people propounding the fatalistic theories. Whether these are being expressed out of pure academic viewpoints or some persons have some axe to grind with certain public officials in the central bank or simply attempting to court public opinion /whip up animosities to becloud other personal issues requires critical thinking.
Any commercial organisation that makes a significant or extraordinary loss will require fresh capital injection to sustain its operations. Of even critical importance is an evaluation of the cause of the loss and the probability of the institution’s capacity to absorb the losses in the short or medium term by re-tweaking its strategies and/or objectives.
Recapitalisation may be pursued by organisations for a variety of reasons, including perceived confidence in the economic outlook. This may make the company call for a rights issue instead of debt capital, given the prevailing cost of debt and profit generation capabilities.
To say the central bank needing recapitalisation amounts to it being bankrupt is close to irresponsibility.
Insolvency may be cured by recapitalisation but bankruptcy, as used by some commentators who should know better, must not be used to describe the financial state of the central bank, given its mandate and the tools under its sleeve to steer the economy on a path of economic growth and price stability.
Regarding the losses made by Bank of Ghana in the last two years, it is instructive to note that the causes have been amply explained by the institution. Even most significantly, these have not been obscured in any creative accounting gymnastics.
The barrage of criticisms and the patently diabolic nature of some of the commentaries on air requires an equally robust and consistent communication strategy. The public must not be deliberately fed with speculations that lead to a loss of public confidence in the entire financial system already reeling under the sectoral reforms of 2017- 2019 due to critical corporate governance infractions.
It is important to emphasise that central banks across the globe have come under intense difficulties, flowing partly from the covid pandemic and the exposure to inflationary pressures arising from the Russian- Ukraine war. Each jurisdiction has dealt with effects of these occurrences, with a common denominator being difficult central bank support mechanisms.
Many central banks have had to implement radical measures to mitigate the economic impact of the pandemic. Increased borrowing and widening budget deficits have been the bane of many central banks, even in more stable economies.
Fighting inflation, which peaked at 54.1 percent at the end of December 2022, to 23.2 percent in 2023 obviously came at a great cost, in addition to the effects of the DDEP measures which affected not only Bank of Ghana, but other banks, financial institutions and even individual bondholders.
Visiting the repercussions of these fiscal and monetary measures solely on the central bank and embellishing these with spurious reasons for the current difficulties, spiced with naked untruths, do not inure to the country’s economic outlook, particularly the depreciation of the cedi against other major currencies.
Deliberate misinformation about the role of the central bank in the current economic difficulties, including claims of a gargantuan US$40million residence for the governor needs to be debunked with equal force so that apparently, personal vendetta does not spill over to derail national aspirations. Governors will come and go but it is part of our national sovereignty that there must always be a credible central bank.
Of course, others reserve the right to believe the explanations offered by the bank, but deliberately twisting facts to give the impression that funds have been looted from state coffers and turning public anger against the central bank officials leaves one to wonder whether there is not a grand scheme to court disaffection and earn undeserved sympathy from the court of public opinion.
This is against the backdrop that every economic policy stance has alternative approaches and solutions, viewed against the exigencies of the time during which the problem needed to be fixed. It is easier to wade through a post-mortem evaluation of the approaches and the results obtained than to effectively handle the fire while it was raging furiously.
By all means, let us engage in politics and offer credible alternative policies, but being mindful of upholding institutions and the national interest at all times. The financial system thrives on confidence. Any attempt to disturb this confidence building, given our historical antecedents, must be carefully weighed among a largely financially-illiterate population.
Inherent fallacy in GDP per capita concept?
Struggling to earn a pass in statistics at the university, I used to console myself that some statistical concepts are only useful under multiple caveats.
The limitation of statistics must be taught with the same zeal as the abstract computations if the subject is to be meaningful. Recent events in Kenya should convince us that economic indices are not enough to enable us gauge economic growth and the extent to which these reflect in people’s lives.
This thought captured my attention as I drove through Accra’s central business district, frustrated by intense traffic jam, pushing me into a reflective mode as usual.
I struggled to comprehend how the concept of GDP per capita is used as a convenient measure of economic growth. It struck me to recall the paradox of economic growth without development, which is real and does happen in many countries.
As I watched the frenzy with which people were struggling to eke out a living with head pans, paltry collection of vegetables and other foodstuffs, Chinese textiles and other items of low value, I began to ask myself how useful the concept of GDP per capita is and how real development trickles down to this section of the population.
How were the varied street vendors operating in the midst of huge piles of garbage, oblivious of the stench; and the ‘trotro’ drivers merely burning expensive fuel benefitting from economic growth.?
Then, I wondered about the GDP index which captures the value of goods and services produced in a country divided by the population at a point in time (The IMF in 2020 estimated Ghana’s as US$2374, which leads to the question: how many people in Ghana earn that average figure in a year?) How does that reveal the standard of living of the people, explain the poverty of the masses and vast inequalities in access to quality education and adequate health facilities?
How has the production of crude oil in Ghana inured to the standard of living of the majority of these people, when they continually lament over high fuel prices and high transport fares translating into high cost of staple foods, decreasing their purchasing power and perpetually sinking them into subsistence living?
Within the same economy, others are earning over GH¢60,000 per month, plus numerous incentives and still stealing public funds unapologetically.
How do we account for the colossal amount of money spent on waste collection? Who are the real beneficiaries of the payment for these services? How does the cost of maintaining security due to uncontrolled urbanisation and population explosion benefit this segment of the population?
How does the nominal GDP per capita explain that over 50 percent of cocoa farmers earn less than the value of 5 bags of cocoa in a season? Does the fact that the chief farmer in Sefwi Akontombra produce 200 bags say anything about endemic poverty manifested in poor roads, health and education facilities for the majority of the people?
If we do not collectively do something to make the poor segment of the population feel a sense of inclusivity and only consider them as ‘election materials’, we shall end up with an increasingly hostile population that feels perpetually marginalised.
When their lot is continually manifested in fights over transport fares, unaffordable rent and utility charges and generally diminishing purchasing power, they feel alienated from the economy. Dealing with such people, many with no fixed addresses and increasingly despondent about their lives, can be a security threat that cannot be fixed merely by establishing a Ministry of National Security.
Let the politicians and technocrats think about these when the devil prompts them to inflate public contract values in the absence of effective controls and sanctions in a justice system which appears to favour the rich and powerful.
None can enjoy peace when surrounded by extremely desperate people who are teased by increasing GDP and supposedly lower inflation which they hardly feel in their daily lives.
The writer is a Fellow of the Chartered Institute of Bankers, a former adjunct Lecturer at the National Banking College, a farmer and the author of ‘Risk Management in Banking’ textbook.
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