The Director of Research at the Institute of Economic Affairs (IEA) has defended the Bank of Ghana (BoG) against undue blame for its participation in the government’s Domestic Debt Exchange Programme (DDEP), which contributed to the central bank’s financial loss in 2022.
Dr John Kwakye acknowledged the BoG’s responsibility for extending excessive loans to the government, yet he maintained that the central bank cannot be criticised for accepting a “haircut” as part of the DDEP.
In the 2022 fiscal year, the Bank of Ghana reported a substantial loss of GH¢60.8 billion.
Amidst repeated calls from the Minority in Parliament for the resignation of the Governor of the Bank of Ghana, Dr Ernest Addison, and his deputies over perceived recklessness in central bank management, Dr Kwakye spoke on the matter during an interview on Citi TV.
Dr Kwakye elaborated, “As central bankers, financing the government’s deficit is the most inflationary thing to do. That is why the central banks set lending limits to their governments.
“What has happened in our case [BoG] is that it looks like BoG went far beyond the sealing Act of last year’s revenue of 5%.
“We are told that they lent almost GH¢44 billion, and that is the magnitude. Once you do that, you are already getting yourself into serious trouble.”
He continued, highlighting the BoG’s involvement in the DDEP, which qualified Ghana for an IMF programme. Kwakye noted that out of the declared GH¢60.8 billion loss, a significant GH¢53.1 billion directly resulted from the DDEP. He emphasized that while fault could be attributed to over-lending to the government, it was essential to acknowledge the compulsion the BoG faced to engage in the DDEP.
“BoG over-lent to government and then you bring in this DDEP which qualifies us for IMF programme. And IMF compels BoG to be part of it. Out of the GH¢60.8 billion loss they have declared, GHC53.1 billion is coming direct from DDEP.
“So the question is will you fault them for that? We can fault them for over-lending to the government that is the problem, but why they were being forced to be part of the DDEP, is also another. That one, you can’t fault them for that”.
Kwakye directed scrutiny towards the IMF, questioning their imposition of the DDEP on the Bank of Ghana in pursuit of a $3 billion bailout.
Furthermore, Kwakye attributed a portion of the responsibility to the government for BoG’s losses, emphasizing their role in creating deficits that necessitate financing.
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