Ghana’s Central Bank: The High Stakes of Recapitalising the Bank of Ghana
- A National Imperative in the Wake of Deep Losses
Ghana is facing a moment of reckoning. At the heart of the country’s monetary system, the Bank of Ghana (BoG)—the institution tasked with ensuring financial stability, managing inflation, and safeguarding the value of the cedi—is now in dire financial straits. Its capital position has not only deteriorated but turned decisively negative, prompting urgent calls for recapitalisation.
According to Dr. Richmond Atuahene, a respected banking consultant and financial analyst who spoke exclusively to NorvanReports, the central bank’s current condition is both alarming and unsustainable. “We are well past the danger zone,” Dr. Atuahene declared. “Recapitalising the BoG is no longer optional. It is a national economic imperative.”
He added: “Without urgent recapitalisation, Ghana risks not only losing its monetary anchor but also suffering from a broader crisis of confidence that could cripple the financial system.”
Capital Crisis: A Fractured Balance Sheet
The call for recapitalisation comes in the wake of three consecutive years of staggering losses by the Bank of Ghana:
- In 2022, the Bank 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.
- Sources now have disclosed that in 2024, the Bank will post yet another loss—exceeding the range of GHC10 billion.
Together, these losses have pushed the central bank’s equity into deeply negative territory, threatening its credibility and independence.
“BoG took the largest haircut in the debt restructuring process—50% on its holdings of non-marketable government debt, amounting to GHC32.3 billion. Add another GHC16.1 billion in marketable debt losses and GHC4.7 billion from COCOBOD exposure, and you see a central bank that has absorbed the entire systemic shock,” Dr. Atuahene explained.
Why Recapitalisation Now?
“Recapitalisation is not just about plugging a financial hole,” Dr. Atuahene argued. “It’s about restoring the operational credibility of the institution responsible for Ghana’s macroeconomic stability.”
He believes that with BoG’s capital depleted, the institution lacks the autonomy and firepower to effectively fight inflation, regulate the banking sector, or intervene in currency markets.
More critically, a weak central bank becomes vulnerable to fiscal dominance, where monetary policy decisions are subordinated to government financing needs. “BoG must never again be put in the position of monetising deficits. It undermines trust, fuels inflation, and weakens the cedi,” he said.
IMF Backing and the Roadmap
The International Monetary Fund (IMF) shares Dr. Atuahene’s concerns. In its 2024 Ghana Country Report (No. 24/334), the Fund recommended several recapitalisation options:
- Suspension of profit transfers to the government.
- Asset transfers or budgetary injections.
- Issuance of marketable securities to restore equity.
- Use of retained earnings over time.
To reinforce these efforts, the BoG signed an MoU with the Ministry of Finance in April 2023 to halt all monetary financing of the budget.
“Recapitalisation is essential to regain monetary policy independence,” said Dr. Atuahene. “The IMF’s endorsement is a signal to investors and markets. But the government must act with speed and clarity.”
Parliamentary Oversight: Ensuring Transparency
A key point of Dr. Atuahene’s proposal is when he backed an earlier proposal made by a top Banking Consultant and Economist with over 20 years experience that Parliament must supervise the recapitalisation process. He argues that with the Parliamentary oversight, such oversight will ensure public accountability and prevent political interference.
“Parliament must play a transitional supervisory role,” the Economist/Banking Consultant said. “This is not about limiting the Bank’s autonomy; it’s about restoring its integrity in the eyes of the Ghanaian people.”
Dr. Atuahene also questioned the current institutional setup of BoG, which allows it to perform both treasury and monetary policy functions. “These roles must be separated. The lines have blurred to the detriment of the Bank’s independence.”
The Broader Economic Consequences
The central bank’s financial distress is not just a headline; it is having real-world consequences:
- Inflation remains high—averaging 23.1%.
- The policy rate sits at 28%, stifling credit growth.
- The cedi continues to face pressure, reflecting a lack of confidence.
With a weakened balance sheet, BoG’s interventions in the FX market are limited. Its moral authority to enforce banking regulations is also questioned, especially as restructured government bonds can no longer be considered risk-free for capital adequacy calculations.
“If the central bank cannot maintain the perception of solvency, it loses its power to influence expectations. That’s how you get inflation spirals,” Dr. Atuahene warned.
Lessons from Around the World
The idea of a central bank operating with negative equity is not unprecedented. But Dr. Atuahene cautions against drawing false equivalencies.
- The Swiss National Bank reported losses of CHF132 billion in 2022.
- The Bank of England is facing a £150 billion recap bill.
- The US Federal Reserve has suspended profit remittances to the Treasury.
“These examples are not comparable,” Dr. Atuahene said. “Those central banks are backed by governments with strong fiscal positions and institutional legitimacy. Ghana does not have those cushions. We cannot afford complacency.”
Exploring Innovative Financing Options
Given Ghana’s constrained fiscal space and debt overhang, Dr. Atuahene recommends innovative solutions for recapitalisation:
- Diaspora Bonds and Remittance-Linked Financing: Ghana receives significant annual inflows from remittances—estimated at over $4.5 billion. Dr. Atuahene noted that if even a fraction of this were mobilised through structured investment products such as diaspora bonds, it could unlock substantial capital without further burdening the national budget. “We need to convert emotional patriotism into financial patriotism,” he said. “With transparency, accountability, and incentives—such as competitive interest rates, tax exemptions, or dual-currency features—we can attract global Ghanaian networks to support this national objective.” He emphasized the need for a marketing strategy that targets both high-net-worth individuals and grassroots contributors, using fintech channels to facilitate global participation.
- Resource-Backed Securities (RBS): With vast deposits of gold, lithium, and bauxite, Ghana holds untapped capital that can be leveraged. “We can securitise future revenues from these resources into structured financial instruments to raise immediate funds,” said Dr. Atuahene. “This is not about mortgaging our future, but about unlocking the present responsibly.” He pointed to successful examples from countries like Angola and Mongolia. However, he cautioned that transparency, realistic pricing, and institutional safeguards must be in place to prevent misuse and ensure sustainability.
- Sale of Non-Core Assets: Including BoG’s 12% stake in ADB and real estate holdings. “These assets are not part of BoG’s core monetary functions. Divesting them under the right conditions could inject much-needed capital.”
“Traditional tools alone won’t cut it,” he noted. “We must think creatively, but with discipline and transparency.”
Structural Reform Must Accompany Capital
Dr. Atuahene stresses that recapitalisation must not occur in isolation. It should be part of a broader institutional and legal reform agenda, including:
- Enacting a rules-based profit distribution policy.
- Building a transparent recapitalisation buffer linked to nominal GDP growth.
“The Bank must have the tools and the autonomy to rebuild capital over time, without being dragged into fiscal firefighting,” he explained.
The Cost of Inaction
Failure to act could prove catastrophic. “Without capital, BoG becomes a passive observer, not a proactive actor,” Dr. Atuahene warned. “It will be unable to defend the currency, anchor inflation, or provide credible guidance to markets.”
Public trust is also at stake. “People see the central bank as a bank. When it reports massive losses year after year, confidence evaporates,” he said.
Conclusion: A Turning Point for Ghana’s Economic Governance
Ghana’s central bank is at a crossroads. With negative equity, policy insolvency, and mounting losses, it must be recapitalised to reclaim its independence and restore monetary stability.
“This is not just about fixing a balance sheet,” Dr. Atuahene concluded. “It’s about restoring Ghana’s credibility in the eyes of its citizens and the international community. Recapitalisation must be swift, strategic, and anchored in institutional reform.”
For a country that has defaulted on its debt, faces limited access to capital markets, and struggles with high inflation, recapitalising the central bank is not merely financial housekeeping—it is an existential necessity.
Ghana cannot afford to delay. The longer the Bank of Ghana remains undercapitalised, the more its credibility erodes—and with it, the economic future of the nation.
