Vice President Dr. Mahamudu Bawumia addressed the nation on February 7, when he announced his vision for the country and urged Ghanaians to salute and give particular recognition to the Bank of Ghana – which he claimed had come under unfair criticism for taking the necessary measures to help pull the economy back from the brink of collapse.
The central bank, according to him, provided needed financing to government at that critical moment. Dr. Bawumia commended the Bank for saving the economy from collapse at a time Ghana had lost access to international capital markets.
It is to be recalled that Bank of Ghana recorded a GH¢60.8billion loss in 2022, according to its Annual Report and Financial Statements.
However, central bankers know that the most inflationary source of financing the budget is high-powered money coming directly from the central bank vault. That is why the Bank’s Act provides for such advances up to 5% of the previous year’s revenue.
Hence, it is the magnitude of the advance – over 50% of the previous year’s revenue – that is disturbing.
It’s no wonder inflation peaked at 54.1% in 2022 – and depreciation ballooned to 54.2% in November 2022 before falling bank to 30% in December 2022.
In this regard, the Vice President’s defense of the BoG ii nothing but face-saving and should be treated as mere politicking in an attempt to paint a pretty picture when facts point to the direct opposite.
In fact, Dr. John Kwakye, Director of Research at the Institute of Economic Affairs (IEA), noted that the losses will lead to cuts in some important operations of the Bank in its attempts to save costs.
Though Dr. Bawumia, as Chairman of the Economic Management Team, and Finance Minister Ken Ofor-Atta have downplayed the loss, the country’s balance sheet has been severely impacted.
Dr. Bawumia stated that the financing provided to government by the Bank of Ghana was temporary, mentioning that the central bank has provided zero financing to government in five out of the last seven years.
A good take-away from the lecture, however, was Dr. Bawumia’s insistence on a consensus for a National Development Plan (NDP) with ‘broad contours’, indicating that Party Manifestos must be aligned with the NDP.
