Central Bank Introduces Legislative Reforms to Strengthen Institutional Independence
Governor of the Bank of Ghana (BoG), Dr Johnson Asiama, has disclosed that significant reforms have been made to the Bank of Ghana Act, 2002 (Act 612), aimed at enhancing the Central Bank’s operational and institutional independence.
Speaking during the IMF/World Bank Governor Talk Series themed “From Crisis to Confidence: Ghana’s Journey to Macroeconomic Stabilization,” Dr Asiama revealed that the amendments, which are expected to be laid before Parliament soon, are designed to reinforce the BoG’s autonomy, particularly in relation to fiscal operations and central bank financing of government activities.
“As part of the reforms over the past eight months, we’ve had to make changes to the legislation to strengthen our independence. For example, when it comes to exposures to government or central bank financing, we are taking all that out,” Dr Asiama stated.
He added that the new provisions will clearly define what constitutes “emergency” financing, a term he noted had previously been open to interpretation and contributed to fiscal slippages in 2022.
“The amendments to the Central Bank Act will give us enough room to avoid that. But I must say that even at current levels, we have our independence. We are not controlled by government nor constrained in any way at all,” he asserted.
IMF Photo/Alyssa Schukar
Dr Asiama further noted that the Central Bank is working to restore its financial position following the adverse impact of the Domestic Debt Exchange Programme (DDEP) on its balance sheet.
“The domestic debt issue has impacted, to a large extent, our balance sheet. The Central Bank itself is policy solvent, but technically, you can say we are almost insolvent. The challenge is to repair our balance sheet within a short time,” he explained.
According to him, the Bank views the rebuilding of its balance sheet as a medium-term objective but remains operationally sound in the interim.
“Operationally, we are able to function. However, over the medium term, we will have to rebuild the balance sheet and regain solvency—both technically and policy-wise,” Dr Asiama added.
The Central Bank in 2022 recorded a loss of GHC60.8 billion, mainly due to the government’s Domestic Debt Exchange Programme (DDEP). In 2023, another GHC10.5 billion in losses was incurred, largely from high-cost monetary policy operations.
Together, these losses pushed the central bank’s equity into deeply negative territory, threatening its credibility and independence and rendering the Central Bank policy insolvent.
On the back of its policy insolvency, the Central Bank is requesting for a recapitalisation of the Bank to return to policy solvency to enable effective implementation of its monetary policies.
