Senior finance lecturer at the University of Ghana Business School, Dr Benjamin Amoah, has justified Bank of Ghana’s (BoG) abysmal performance to its participation in some activities, of which the Domestic Debt Exchange Programme (DDEP) is part and has heavily impacted the Bank’s operations.

According to him, the Bank of Ghana attributing its losses to DDEP and loan impairments are equally justified.

He revealed that considering the current situation government finds itself in from last year and this year, and what has happened on the financial sector especially in relation to government issuing securities that all the financial institutions participated in, then “one can justify that the low frequency high-impact events of the Domestic Debt Exchange Programme have hugely contributed to the reported losses from the Bank of Ghana”.

“So, based on that and if you look at the portfolio of assets Bank of Ghana was having, and the exposure the Bank of Ghana exposed itself to, by participating in the treasury bond issued by ministry of finance, then clearly, one can say that for last year 2022, the DDEP has largely contributed to Bank of Ghana’s performance – even compared to the year before, this was not Bank of Ghana’s performance. So, clearly, one can conclude that the DDEP has indeed negatively impacted the Bank of Ghana.”
Dr Benjamin Amoah

Commenting on whether the loss of some GHC60.8 billion by the Central Bank could have been avoided, Dr Amoah indicated that it’ll be a difficult one to say because the Central Bank participated in the bond issued by the ministry of finance, which was an indirect way of financing government activities. With this, he explained that there was no problem until the DEEP came into the picture.

“This strategy used by Central Banks all over the world is to help the Central Bank indirectly finance government activities, which leads to what we call a circular flow of funds. So, the Central Bank then participates in this instrument, indirectly purchases them, releases funds to the treasury and then during the period that the Bank of Ghana holds the instrument, what happens is that the ministry of finance then pays the Central Bank coupon…
“But the challenge is that it is true that in any instances the treasuries around the world do not pay Central banks because… The reality is that the funds are not paid by government. In fact, hardly will you see the Central government paying its indebtedness to the Central Bank. So, in the end you realize that the Central Bank would have indirectly been used to finance government activities which should not be the case.”
Dr Benjamin Amoah

BoG Governor not responsible for Bank’s losses

Meanwhile, Director of Research at the Bank of Ghana (BoG), Dr Phillip Otoo, has revealed that the call for the resignation of the Governor of the central bank Dr Ernest Addison due to the Bank’s GHS60.8 billion loss is wrong. He noted that the factors that accounted for the loss were not the doing of the Governor.

“No, I don’t think we are there yet. if you look at the reasons that are ascribed, there were internal and external factors and especially the impact of the domestic debt exchange.”
Dr Phillip Otoo

Furthermore, Dr Ottoo assured that the Central Bank of Ghana will work to ensure financial stability in the economy despite the loss.

“For the direct impact, yes, we have recorded a loss, but we will continue to discharge our mandate. This is not going to impair our ability to continue to fight inflation. So, we will continue on the path of having stable inflation and ensuring financial stability in the economy.”
Dr Phillip Otoo