Deliberate reckless government policies are leading to the destruction of the economy, Member of Parliament for Tamale North Alhassan Suhuyini has said.
Contributing to a discussion on the losses that the Bank of Ghana made, whilst speaking on the Key Points on TV3 Saturday, June 8, Suhuyini indicated that the central bank losses is a symptom of the larger problem that the entire economy is faced with.
“This is just a symptom of the problems that the whole country is engulfed in,” he said.
He added “The deliberate reckless government policies are creating problems for the entire economy.”
Governor of the Bank of Ghana (BoG) Dr Ernest Addison has explained what led to the GHS10.5billion losses in 2023.
He explained that the central bank’s loss was in line with the experiences of some central banks globally as a result of the cost incurred in delivering on their primary mandate of price stability.
He said in the foreword of the Bank of Ghana‘s 2023 Annual Report and Financial Statement that “With interest rates at high levels, the cost of conducting open market operations surged in 2023, contributing to high interest expenses.”
In addition, he said “impairments on newly issued Government of Ghana Bonds, per IFRS standards, added to the loss position reported in the year. On the income side, the improvement in interest income and earnings derived from the Bank’s foreign investments could not keep pace with total expenditures. As a result, the Bank recorded a loss of GH¢ 10.5 billion, compared with a loss of GH¢ 60.8 billion in 2022.
“Notwithstanding the loss, the overall operations of the Bank were effective enough, and this helped the Bank to defend its mandate of bringing inflation down. Inflation declined significantly in the year, falling from 54.1 per cent in December 2022 to 23.2 percent in December 2023. The Bank continued to be policy solvent as the total income earned from the Bank’s group operations was enough to cover the costs associated with the conduct of monetary policy operations.
“The Bank will continue to pursue policies geared towards high operational efficiency and, together with steps that have been initiated to recapitalise the Bank, the expectation is that positive equity will be restored in the medium-term,” Dr Addison said.
The Bank and the group reported a loss of GH¢10.50 billion for the year 2023, as against the GH¢60.86 billion loss in 2022.
As of 31 December 2023, the total liabilities of Bank of Ghana and its subsidiaries exceeded its total assets by GH¢65.36 billion also as a gaint GH¢54.52 billion deficit recorded in 2022.
In 2023, total operating income of the Bank and the Group increased by 47.3 per cent to GH¢8.80 billion, the Bank of Ghana‘s 2023 Annual Report and Financial Statement disclosed.
This increase in operating income was driven to a large extent by interest earned on the Bank’s investments in securities and bonds held abroad, fines imposed on institutions for regulatory breaches, and fees and charges.
Total operating expenses of GH¢19.2 billion reported for 2023 shows a decline when compared with the GH¢66.9 billion recorded in 2022.
This was due to impairment charges on Loans and Advances and Bank of Ghana’s holding of Government of Ghana securities. In 2022, these two-line items accounted for GH¢54.5 billion in expense charges on account of the Domestic Debt Exchange Programme.
The combination of an increase in total income and reduction in operating expenses led to a total loss position of GH¢10.6 billion, representing an improvement when compared with the loss of GH¢60.9 billion recorded in 2022.
The loss position was driven largely by an increase in total interest expense incurred on Open Market Operations by GH¢ 6.7 billion.
The total cost of Open Market Operations (an activity by a central bank to exchange liquidity in its currency with a bank or a group of banks) in 2022 which stood at GH¢1.7 billion, increased to GH¢8.4 billion in 2023.
The increase in costs associated with open market operations for 2023 was driven in large part by the need to mop up excess liquidity in the economy in 2023 and to support the dis-inflation process envisaged in the overall macroeconomic adjustment program.
This Open Market Operations activity, which accounted for a significant portion of the loss incurred yielded positive results.
The aggressive mopping up operations, contributed in slowing down inflation to 23.2 per cent by the end of 2023, significantly down from the rate of 54.1 per cent at the end of 2022.
