Bank of Ghana denies printing cash to finance Government expenditure
The Bank of Ghana (BoG) has unequivocally stated that it did not engage in the printing of “fresh cash” in 2021 and 2022 to fund government expenses. The denial comes amid recent allegations suggesting that the central bank printed ¢77.6 billion for the government, which was later written off and replaced with a 15-year bond.
Dr. Philip Abradu-Otoo, Director of Research at the Bank of Ghana, refuted the claims during an appearance on PM Express Business Edition on August 3, 2023, hosted by George Wiafe. Dr. Abradu-Otoo asserted that the bank possesses sufficient resources, including reserves offshore, correspondent bank holdings, investments in US Treasury, and trading in gold and currencies, to support its operations and government expenditure without resorting to printing money.
He emphasized that the financing of government expenditure was facilitated from existing resources rather than through the creation of new currency.
Bank of Ghana’s Financial Performance and Loss Recovery
Regarding the bank’s financial performance, the Bank of Ghana recorded a loss of ¢60.85 billion at the end of 2022, in stark contrast to a profit of ¢1.2 billion in the previous year. Speculation had arisen that the loss was a result of fresh government expenditure in 2022. Dr. Abradu-Otoo dispelled this notion, attributing the loss to the impact of the Domestic Debt Exchange Programme, specifically affecting “Legacy Government Papers and Transactions” dating back to 1992.
Despite the loss, Dr. Abradu-Otoo assured that the Bank of Ghana has identified structures and actions to return the bank to positive equity. He expressed confidence that the bank will continue to maintain policy solvency and effectively discharge its mandate even during this period.
Mandate of Bank of Ghana and Justification of Previous Profits
Responding to concerns about the bank’s mandate of ensuring financial stability amidst the loss, Dr. Abradu-Otoo stated that while profit is desirable, the central bank is not always required to generate profits to support economic growth. He highlighted that dividends were paid to the government and reinvested in the bank’s operations in 2021.
Addressing the criticism of Bank of Ghana’s Inflation Targeting Policy, Dr. Abradu-Otoo defended the effectiveness of monetary policy measures in curbing inflation rates. He pointed out that significant strides have been made in reducing non-food inflation, showcasing the impact of monetary policy in that domain.
Despite the temporary financial setback, the Bank of Ghana remains steadfast in fulfilling its mandate and expects long-term resilience in its equity and earnings.
