13 September 2023

Fellow Citizens:
STANDING STRONG WITH THE BANK OF GHANA
By Ken Ofori-Atta, Minister for Finance
There is an anonymous quote that says “banks are to the economy what the
heart is to the human body. They cycle necessary capital through the whole
and they are barely noticed until pressure, necessity, or crises.”
In much the same way, our Central Bank these past almost seven years has
been prudent, strong, resilient and functioning efficiently, and been barely
noticed until the interruption of unprecedented global events. Our Central
Bank’s assets have grown almost in tandem with the size of our financial
sector and economy. From GHS53b in 2016, the Bank’s assets have grown
by nearly one and half to GHS126b as at the end of 2022. The foundation
has never been conspicuous – our revenue has more than doubled since
2016, with total revenue increasing from GHS32b in 2016 to GHS96.7 (end-
December 2022). The size of our economy has also more than doubled from
a GDP value of GHS219.6b in 2016 to an estimated GHS610.2b by the end
of 2022; and more pragmatically the number of active contributors on the
SSNIT register has increased from 1.3 million in 2016 to over 1.8 million in
2022.
We can all attest to the progress made in digitization, infrastructure, the
armed forces and police, public spending on education, agriculture (cocoa
and PFJ), health, and school feeding among others. Indeed, spending on the
education sector including our universities, second-cycle institutions and
basic schools collectively constitute about 20% of tax revenue – and includes
compensation, goods and services, and GETFund spending on infrastructure,
while the health sector consumes about 8-10% of tax revenue, among
others.
However, the vision for and progress in social mobility and economic
freedom is often in budget conflict with short-term macroeconomic volatility,
where the activist roles of fiscal and monetary policy, and if blessed with a
Keynesian benefactor or fiscal windfall, must be deployed to ensure that

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these gains are not eroded. This is especially the case in instances where
the volatility is mainly induced by cataclysmic events such as pandemics and
geo-politics – the controls are often outside the remits of small open
economies with independent central banks like Ghana.
It is within this context that since 2017 and especially between November
2019 and now, both the Ministry of Finance and the Bank of Ghana have
shown the strongest collaboration yet to reset the financial architecture and
to keep the economy strong.
In managing its balance sheet, the Bank of Ghana issues currency, conducts
foreign exchange operations, invests its own funds, engages in emergency
liquidity assistance, conducts monetary policy operations, and liquidity
management, last but not least, for a developing country, serves as a banker
to Government which role may include bridge financing to support budget,
in line with the applicable laws. In essence, this makes the central bank
balance sheet, in the long run, central to its operations. However, as many
central banks, including Bank of Ghana, moved away from pursuing
quantitative targets of monetary policy towards price targets, dominance of
the Central Bank’s balance sheet as the key metric has waned in many
economies and in academic literature as well.
In practice, many central banks have incurred losses, and we can cite as
examples, the Bank of Jamaica, the central banks of Argentina, Brazil, Chile,
the Philippines, Singapore, Turkey, and UK. Historically, some central banks
have operated with negative equity (as a result of losses) yet fully met their
policy objectives, as long as they remain policy solvent. The pandemic and
Russia-Ukraine war have reinforced and increased the number of Central
banks that have moved into negative equity and have thrown light into this
‘new normal.’ Thus, the Central Banks of Chile, Czech Republic, Israel and
Mexico have experienced years of negative equity. The Reserve Bank of
Australia fell into negative equity in 2022 due to valuation losses on its bond
holdings, and the bank stressed that it will not affect its mandate or
operational efficiency. And unheard of in the modern financial setup, the
German central bank, that citadel of fiscal purity, recorded a loss in 2022.

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The US Federal Reserve Bank in April 2022 also declared a negative equity
position, on account of the rapid rise in rates that began in 2022, renewed
interest expenses on commercial bank reserves deposits, and low income on
its security holdings, including US Government securities. In fact, as
indicated by the Brookings Institution, “the Fed’s cumulative losses came to
more than $52 billion as at the end of April 2022, exceeding its paid-in capital
and surplus, and in effect, leaving it in negative equity.”
(I cite these examples just to make the point that hitherto unheard of things
have been happening in central banks around the world recently.)
Accordingly, as the focus shifts from direct targets of money supply to
interest rates as operational targets, the framework for analysing central
bank balance sheets has shifted, enabling central banks to play more
interventionist roles in the economy than before. As seen during the 2007
global financial crisis and the COVID era, over $16 trillion of quantitative
easing (QE) was reported to have been spent by the G7 countries.
The modern economic policy consensus is clear: central banks can and do
run on negative equity and they can make losses to support economic
recovery; and these losses will not be counted as failure as in commercial
banks and enterprises. In fact, as some critics of the Central Bank in our
country do observe, the primary objective of a central bank is not to make
profit but to be managed as a financially sustainable institution. We must in
these extraordinary times deploy all the instruments we have available and
sail together through this odyssey. The call for us as Citizens, is not to be
seen as punishing the Bank of Ghana for pitching up to support the greater
public good!
It is probably a good time to recall the wise words of the late Professor P.A.
V Ansah that even as we educate and inform, we must foster national
cohesion because “…national cohesion is the foundation upon which any and
everything is built.”
The Government’s debt operations that commenced in 2022, and executed
this year, 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. As of 2022, the Central Bank held about GHS42.3b of

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Government’s domestic debt, out of the total (domestic) debt stock of
GHS194.3b. This debt holding, 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.
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. 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. 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.
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
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to our supply chain induced by both Covid-19 and international geopolitics.
In resolving these, we have all had to make sacrifices, and the BoG balance
sheet was significantly affected.
With respect to the BoG’s new headquarters, the evidence is clear that
decisions to build had already been made long before these “losses”
occurred. It is important for us to support such a critical institution to
modernize its operations and have a befitting office space for a country that
hosts the AfCFTA and has a vision to become the financial services hub of
the continent.
Governor Addison is a competent professional of quiet courage. In these
nearly seven years, we have worked together to ensure: the inviolability of
the banking system; the establishment of the Consolidated Bank of Ghana
(CBG) and the Development Bank of Ghana; the raising of over $10 billion
in the Eurobond market and AfriExim bank. He brought inflation down to
single digits of 7.9% for the first time; and managed an impressive period
of currency stability in our country including the implementation of the Gold-
for-Oil programme. It is either simply the height of irony or a sad reflection
of the state of public discourse in our country that this man, steps up in a
period of unprecedented global economic meltdown and domestic economic
crises, and he is being pilloried for his good work.
The challenges that confront us are surmountable, as we can all bear witness
to the fact that the economy is beginning to turn the corner, and we are
confident that “He who began a good work in [us] will carry it on to
completion” (Phil 1:6). Some developments appear expensive in the short
term but will actually turn out to provide the right impetus for more
innovation and reforms and a can-do spirit for the long term. l will urge this
mindset for us to address our common future. I therefore ask for restraint
in our choices and actions as we pursue our democratic rights… for “’All
things are lawful,’ but not all things are helpful. ‘All things are lawful,’ but
not all things build up” (1 Cor 10:23). National cohesion should remain
paramount for us all.
These are critical times when the two institutions, MoF and BoG, have
synchronized their efforts to achieve expedited responses from the IMF, the

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World Bank, the Paris Club, and China to enable us to rebuild confidence and
for our economy to turn the corner in record time as evidenced by a 4.2%
growth in GDP, declining inflation, and a stabilized currency. We have in the
past few weeks successfully completed the DDEP with over 90% tendering
of cocoa bills, domestic dollar bonds, and pension fund investments while
making the first DDEP coupon payments of GHS2.4 billion to honour the
government’s obligation to domestic bondholders on 22nd August 2023 and
about GHS2.3 billion on 5th September 2023 to pension funds bondholders.
We are in like manner, looking forward to successful negotiations with the
Paris Club and our Eurobond investors.
This should be a period to build hope and hitch all our wagons together in
order to take our community across the Jordan. This is a period in which we
must as a nation work with equanimity and dispel any cloud of nihilism. We
cannot continue to contend with the old Promethean punishment which
frustrates the steady regeneration of our economy. We must be mindful and
deliberate in fighting with a fierce sense of urgency to guarantee economic
freedom and social mobility for all and critically social cohesion. We must
work together with a spirit to build up and not to tear down, as we progress
our democracy.
I am confident that working together, this nation will not only prevail, but
enjoy prosperity for “Behold, the people are one, and they have all one
language… and now, nothing will be restrained from them which they have
IMAGINED” (Genesis 11:6).