10th Anniversary of Naba Martin Adongo Abilba III

In defence of Bank of Ghana
Dr Ernest Addison, Governor, BoG

In defence of Bank of Ghana

Our Central Bank’s assets have grown almost in tandem with the size of our financial sector and economy. From GH¢53b in 2016, the bank’s assets have grown by about 138 per cent to GH¢126b as of the end of 2022. 

The foundation has never been conspicuous – our revenue has more than doubled since 2016, with total revenue increasing from GH¢32b in 2016 to GH¢96.7 (end-December 2022).

The size of our economy has also more than doubled from a GDP value of GH¢218.6b in 2016 to an estimated GH¢577.3 b by the end of 2022; and more pragmatically the number of active contributors on the SSNIT register has increased from 1.3 million in 2016 to over 1.8 million in 2022. 

We can all attest to the progress made in digitisation, infrastructure, the armed forces and police, public spending on education, agriculture (cocoa and PFJ), health and school feeding among others. 

Indeed, spending on the education sector including our universities, second-cycle institutions and basic schools collectively constitute about 20 per cent of tax revenue – and includes compensation, goods and services, and GETFund spending on infrastructure, while the health sector consumes about 8-10 per cent of tax revenue, among others. 

However, this vision for and progress in social mobility and economic freedom is often in budget conflict with short-term macroeconomic volatility, where the activist roles of fiscal and monetary policy, and if blessed with a Keynesian benefactor or fiscal windfall, are urgently needed to ensure that these gains are not eroded. 

This is especially the case in instances where the volatility is mainly induced by cataclysmic events such as pandemics and geo-politics – the controls are often outside the remits of small open economies with independent central banks such as Ghana. 


It is within this context that since 2017 and especially between November 2019 and now, both the Ministry of Finance and the Bank of Ghana have shown the strongest collaboration yet to reset the financial architecture and to keep the economy strong. 

In managing its balance sheet, the Bank of Ghana issues currency, conducts foreign exchange operations, invests its own funds, engages in emergency liquidity assistance, conducts monetary policy operations, and last but not least for a developing country, smoothens the country’s fiscal operations through periodic overdrafts that are often reconciled by the end of the year.

In essence, this makes the central bank balance sheet, in the long run, central to its operations. 

However, as many central banks including Bank of Ghana moved away from pursuing quantitative targets of monetary policy towards price targets, dominance of the Central Bank’s balance sheet as the key metric has waned in many economies and in academic literature as well. 

In practice, many central banks have incurred losses, including the Bank of Jamaica, the central banks of Argentina, Brazil, Chile, the Philippines, Singapore, Turkey and UK. 

Historically, some central banks have operated with negative equity (as a result of losses) yet fully met their policy objectives.

The pandemic and Russia-Ukraine war has reinforced this ‘new normal.’ Thus, the Central Banks of Chile, Czech Republic, Israel and Mexico have experienced years of negative capital. 

The Reserve Bank of Australia fell into negative equity in 2022 due to valuation losses on its bond holdings, and the bank stressed that it will not affect its mandate or operational efficiency.

Again, the German central bank recorded a loss in 2022 which it covered by a standby fund. 

In particular, the US Federal Reserve Bank in April 2022 declared a negative equity position, with its net asset position at minus $3.27 billion on account of rapid rise in rates that began in 2022, renewed interest expenses on commercial bank reserves deposits and low income on its security holdings including US Government securities.

In fact, as indicated by the Brookings Institution, “the Fed’s cumulative losses came to more than $52 billion as at the end of April 2022, exceeding its paid-in capital and surplus, and in effect, leaving it in negative equity.”

Accordingly, as the focus shifts from direct targets of money supply to interest rates as operational targets, the framework of analysing central bank balance sheets has shifted, enabling central banks to play more interventionist roles in the economy than before as seen during the 2007 global financial crisis and the COVID era where over $16 trillion of QE (quantitative easing) was reported to have been spent by the G7 countries. 

The modern economic policy consensus is clear: central banks can and do run on negative equity and that they can make losses to support economic recovery; and these losses will not be counted as failure as in a commercial enterprise.

In fact, as some critics of the Central Bank in our country do observe, the primary objective of a central bank is not to make profit but to be managed as a financially sustainable institution.

We must in these extraordinary times deploy all the instruments we have available and sail together through this odyssey.

The call for us as Citizens, is not to be seen as punishing the Bank of Ghana for pitching up to support the greater public good!

We should remember the wise words of the late Professor P.A. V Ansah that even as we educate and to inform we must foster national cohesion because “…national cohesion is the foundation upon which any and everything is built.”

The Government’s debt operations that commenced in 2022, and executed this year, have had significant impact on Bank of Ghana’s balance sheet while reducing the amount of money spent on interest payment for the Government.

As of 2022, the Central Bank held about GH¢42.3b of Government’s domestic debt, out of the total (domestic) debt stock of 


This debt holding, in addition to others, resulted in a loss impairment provision of about GH¢48 billion for the bank in 2022. 

As indicated by the IMF, the BoG was the shock absorber for the debt exchange to ensure that in light of the concessions to other domestic bondholders, its burden share of the debt exchange will enable the economy to still achieve the overall objectives of the Exchange –  the Domestic Debt Exchange Programme will ensure the NPV of the stock of public sector debt is halved from the then 105 per cent of GDP (later recalculated as 89%) to 55 per cent of GDP by 2028, thereby putting the country on a sustainable debt trajectory. 

As indicated by the Board of Directors of the Bank in their 2022 annual reports, all efforts will be made to restore the balance sheet of the bank in the medium term, continue to improve the efficiency of their operations, and resort to the Government for recapitalisation over the medium to long term if necessary.

There is, therefore, no need for a direct attack on the leadership of the Central Bank. 

As the Minister for Finance, I do have my observations about the reforms needed to strengthen the governance of many financial institutions including the Bank of Ghana. 

But this requires a positive and sober national debate on the governance structure; whether we revisit a separate chairmanship and governorship (such was the case prior to governor Dr Agama’s years) and whether our democracy and institutional experience support Governors playing both board leadership and management roles as enshrined in our laws. 

We also need to have the discourse for policy clarity on what the independence of the central bank implies, especially in Lower-Middle Income Country and transformational economies such as ours.

I do personally believe that central banks must have independence in executing their monetary policy mandate especially if it is based on a price target, where the Government sets the price targets, and Central Banks, in our case, BoG, independently uses it operational tools to achieve it. 

Governor Addison, just like me, has faced major economic hurdles since 2017, inheriting a derailed IMF programme and a highly impaired and ethically strained financial industry from our predecessors, navigating the serious revenue shocks on the back of Covid-19 and distortions to our supply chain induced by both Covid-19 and international geopolitics.

In resolving this, we all have had to make sacrifices, and the BoG balance sheet was significantly affected.

With respect to the BoG’s new headquarters, the evidence is clear that decisions to build had already been made long before these “losses” occurred.

It is important for us to support such a critical institution to modernise its operations and have a befitting office space for a country that hosts the AfCFTA and has a vision to become the financial services hub of the continent. Governor Addison is a competent man of quiet courage. 

In these nearly seven years, we have worked together to ensure: the inviolability of the banking system; the establishment of the Consolidated Bank of Ghana (CBG) and the Development Bank of Ghana; the raising of over $10 billion in the Eurobond market and AfriExim bank. 

He has brought inflation down to single digits of 7.9 per cent; and managed an impressive period of currency stability in our country including the implementation of the Gold-for-Oil programme.

He steps up in an unprecedented period of global economic meltdown and domestic economic crises yet he is being pilloried.  

The challenges that confront us are surmountable, as we can all bear witness to the fact that the economy is beginning to turn the corner, and we are confident that “He who began a good work in [us] will carry it on to completion” (Phil 1:6).

Some developments appear expensive in the short term but will actually turn out to provide the right impetus for more innovation and reforms and a can-do spirit for the long term. l will urge this mindset for us to address our common future. 

I therefore ask for restraint in our choices and actions as we pursue our democratic rights… for “’All things are lawful,’ but not all things are helpful. ‘All things are lawful,’ but not all things build up” (1 Cor 10:23). National cohesion should remain paramount for us all.

These are critical times when the two institutions, MoF and BoG, have synchronised their efforts to achieve expedited responses from the IMF, the World Bank, the Paris Club, and China to enable us to rebuild confidence and for our economy to turn the corner in record time as evidenced by a 4.2 per cent growth in GDP, a declined inflation, and a stabilised currency.

We have in the past few weeks successfully completed the DDEP with over 90 per cent tendering of cocoa bills, domestic dollar bonds, and pension fund investments while making the first DDEP coupon of GHS2.4 billion to honour the government’s obligation to domestic bondholders on 22nd August 2023 and about GH¢2.3 billion on 5th September 2023 to pension funds bondholders. 

We are in like manner looking forward to successful negotiations with the Paris Club and our Eurobond investors.

This should be a period to build hope and hitch all our wagons together in order to take our community across the Jordan. This is a period in which we must as a nation work with equanimity and dispel any cloud of nihilism.  

We cannot continue to contend with the old Promethean punishment which frustrates the steady regeneration of our economy; we must ensure economic freedom and social mobility for all.

I am confident that working together, this nation will not only prevail, but enjoy prosperity for “Behold, the people are one, and they have all one language… and now, nothing will be restrained from them which they have IMAGINED” (Genesis 11:6).

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