Dr John Kumah Writes: Ignore this funny NDC Propaganda about the collapse of the Bank of Ghana (BoG), BoG is Solid !
The NDC is funny! It’s not true that a recapitalization levy is to be introduced for BoG , the Central Bank hasn’t collapsed.
The main source of income to the Bank is from government transactions i.e. fees and charges on all government transfers, the bank’s investments in marketable instruments and also earnings from non-marketable holdings of the Bank.
Given that government transactions have gone down, naturally, the income of the bank will go down. Also, because of the debt restructuring, earnings on their holdings on markable and non- marketable bonds will go down.
Beyond this, the Bank is solid and is capable of performing its core function. Article 183 clause 2 (c) of the 1992 constitution enjoins the Bank of Ghana to promote and encourage economic development in the country , hence there is nothing untoward in the actions of the Central Bank to support the state in its economic recovery efforts.
It is important to further highlight that a negative balance sheet by a Central Bank is not unusual, in fact most Central Banks around the world run negative balances to achieve the overall economic anchor objectives of a Central Bank.
“History clearly illustrates this. Several central banks had negative equity yet fully met their objectives – for example, the central banks of Chile, Czechia, Israel and Mexico experienced years of negative capital. But throughout, financial and price stability were maintained.” – Bank For International Settlements Bulletin No.68.
According to Nordstrom and Vredin (2022), a central bank’s credibility depends on its ability to achieve its mandates. Losses do not jeopardise that ability and are sometimes the price to pay for achieving its aims.
Such propaganda and unnecessary attacks at the central bank only results in increased market volatility, panic selling of assets, and can trigger chain of events that can affect our overall economic stability.
