The Bank of Ghana has come under severe public criticisms recently mainly due to its monumental losses incurred during the 2022 financial year. Expert estimated that Bank of Ghana’s declared losses for 2022 are on the order of 8% of Ghana’s entire GDP.

On Tuesday, October 3 2023, in what will be later described by the Governor of the Central Bank as unnecessary exercise, thousands of protesters thronged on the principal street of Accra calling for the head of Ghana’s central bank’s Governor and his two deputies.

Ghana’s central bank according to its 2022 Annual Report and Financial Statement as of 31st December 2022 recorded a colossal loss of GHS 60.8 billion.

Per the central bank’s audited financial statement which was published on July 28 2023, the overall liabilities of the central bank and its subsidiaries as of the 31st December 2022 exceeded its total assets by GHS 54.52 billion.

The central bank also spent a staggering GHS131.6 million on vehicle maintenance; GHS67.9 million on computer-related expenses; GHS97.4 million on foreign and domestic travels; GHS32 million on communication expenses; and GHS357.9 million on banking supervision, in 2022 alone.

Additionally, the Central Bank amidst its huge losses is building a new headquarters at $250 million. Bright Simmons, an Honorary Vice President of policy Think-Thank, IMANI-Africa argued that those inclined to cut BoG some slack for the losses stemming from its reckless lending to the central government have to face the shambolic project management that has seen costs of its new headquarters balloon by nearly 300% at design stage.

According to Mr Simmons, the cost and time overrun models suggest that cost variations worsen during actual construction, so the total cost may well hit $500 million.

These huge losses according to the Central Bank are attributed to the government’s domestic debt restructuring programme, increases in operational expenses, the depreciation of the Ghanaian cedi and interest expense on monetary policy operations.

However, experts argued of these four reasons, only the last can be adduced to support the BoG’s innocence, but it accounts for only 6% of the losses. The three other causes stem from underlying problems for which the BoG cannot in any way escape blame.

According to the World Bank the economic hardships occasioned over the period pushed over 850,000 Ghanaians below the poverty line in the year 2022.

Some of the central bank critics have raised genuine concerns that the current situation may also curtail the BoG’s capacity to bail out most commercial banks suffering from liquidity shortfalls due to the ravaging effect of the ongoing public debt restructuring.

Professor of Finance and Economist at the University of Ghana Business School, Godfred Bokpin expressed disappointment at the leadership of the central bank and even asked the Governor to resign saying that “in any serious society, I don’t think the governor will need somebody to advise him to resign; this GHS 60 billion loss is not something you would want to be on your CV’.

Rebuilding Public Confidence; BoG’s Dialysis

The events after the publication of BoG 2022 Annual Report and Financial Statement have caused public disaffection to the central bank. It is therefore important that measures are put in place to prevent further destructions.

Restoring reputation requires a holistic approach that focuses on both the technical aspects of financial management and the perception of the institution by the public and stakeholders. In the case of the central bank, openness, accountability, and a commitment to improvement are key factors required to rebuild such confidence in the public.

Accountability plays a crucial role in restoring public confidence within the Bank of Ghana. When an institution takes responsibility for its actions, addresses its mistakes, and implements measures to prevent future occurrences, it demonstrates its commitment to transparency, integrity, and improvement.

The Bank of Ghana must therefore admit its mistakes and take responsibility for its losses. This will reassure stakeholders, including investors, customers, and the public, that it is committed to rectifying its mistakes and preventing them from happening again.

This reassurance can help prevent panic and uncertainty. Again, taking accountability for the losses would go a long way in rebuilding trust among the public.

Moreover, the central bank must use the situation as an opportunity to identify areas where the Bank’s policies, processes, and systems need improvement. There is a need to implement necessary reforms to strengthen the institution’s financial stability and risk management capabilities.

Here, the central bank must begin to build back a positive equity which shall include retention of profits to help build capital until equity firmly returns to the positive region and refrain from monetary financing of the Government of Ghana’s budget.

In this regard, the central bank must comply with the Memorandum of Understanding on zero financing of the budget signed between the Bank of Ghana and the Ministry of Finance on 26 April 2023.

In addition, the central bank must begin to initiate steps to engage with key stakeholders, such as the Minority Caucus in Parliament, industry leaders, financial experts, academia and civil society organizations to gain insights and input on the corrective action plan.

This would offer the central bank the opportunity to listen to concerns and incorporate valuable suggestions into the strategy. Engagement with relevant stakeholders is a critical component of restoring public confidence in the Bank of Ghana.

When the Bank actively involves and collaborates with key stakeholders, it demonstrates transparency, accountability, and a commitment to resolving issues and improving its operations. The various stakeholders can provide valuable insights, expertise, and perspectives that the Bank might not have considered.

This input will aid the central bank in making more informed decisions. Again, engaging with stakeholders will allow the Bank to receive feedback on its proposed actions and strategies. This two-way communication ensures that concerns are addressed and solutions are refined.