Economist at the University of Ghana Business School, Dr Patrick Asuming, has disclosed that the minority in parliament cannot demand the resignation of the Bank of Ghana (BoG) Governor, Dr Ernest Addison, because of losses recorded at the bank in its latest report.

According to him, there is the need to understand the core mandate of the Central Bank because a lot of discussions has come up due to the whopping GHC60 billion losses. He indicated that the mandate of the Governor includes ensuring price stability through the monetary policy and the stability of the banking system.

Additionally, Dr Asuming stated that the BoG Governor is also responsible for issuing notes and currencies, and also ensuring that the cedi is stable against the other currencies. In light of this, he noted that the BoG Governor cannot be asked to resign because the Central Bank is a regulator of these indices.

“… We cannot demand their resignation because of the loss, because the Bank of Ghana is a regulator. It’s not a state–owned enterprise that we evaluate them on the basis of whether they’re making profit or loss. If there are other reasons we want to demand their resignation, we should discuss that one, and not because they made the loss.”
Dr Patrick Asuming

Despite objecting to the resignation of the BoG Governor on the premise of these losses, Dr Asuming contended that it doesn’t mean that the Bank of Ghana should be making such huge losses. He noted that when the Bank of Ghana is considered over the period, 2022 was an “anomaly in terms of the level and losses” that it has made.

This he revealed, is because historically, it has been making so much profits.

Citing the Domestic Debt Exchange Programme and the haircut the BoG received, Dr Asuming questioned what would have happened if BoG hadn’t received the haircut in the DDEP which resulted in the bank’s losses and where such losses would have gone. To this, he explained that either banks in the country would have had to incur more losses or individual bondholders would have had to take on such losses.

“So, as a regulator, seeing what potentially such losses would do to the banking system and its stability, you can excuse them for absorbing those losses. So, on that count, I wouldn’t fault them too much.”
Dr Patrick Asuming

Criticism of BoG printing of money

Despite being against the call for the BoG Governor’s resignation, Dr Asuming stated that the area where he reckons there’s a legitimate case for criticizing the Central Bank is the printing of money for the government – that is the overdraft it extended to the government. He highlighted that in May 2022, during an interview granted Bloomberg, the Governor indicated that the inflation rate that that the country recorded at the time was primarily due to “surprise side constraints”.

However, he revealed that over the period, the Central Bank has persistently raised the policy rate.

“Admittedly, you may raise the policy rate to stabilize the currency on the exchange rate and other things, but you cannot be printing money for the government to spend and turn around to raise the policy rate to try and mop up the excess liquidity. I think that particular course of action was problematic, and on that score, you can legitimately criticize the Central Bank.”
Dr Patrick Asuming

Furthermore, the economist emphasized that the monetary policy doesn’t sit independent of the fiscal policy, as the duo are supposed to work hand in hand. To this end, he underscored that the problem is that there’s been so many challenges with the fiscal side and the Governor and his deputies, in their view, found it necessary to absorb some of the problems coming from the fiscal side.

“So, for me, we should trace the root of this to why the finance ministry couldn’t manage our debt to the extent that we needed to do this Domestic Debt Exchange and to the extent that the Bank of Ghana felt it necessary [to come in]. I worry that this has become very politicized…”
Dr Patrick Asuming

Meanwhile, Dr Asuming called for reforms needed to ensure BoG is stronger and stays within its constitutional mandate. He noted that the resignation of the Governor would change nothing if the core problems that prevents Central Bank from asserting its independence are not resolved.