Ernest Addison, the boss of the Central Bank of Ghana, is currently under pressure to resign from his post over “fiscal recklessness.”
According to The African Report, Ghana’s opposition party, the National Democratic Congress (NDC) says the central bank is headed into a “bottomless pit” after the treasury recorded a staggering $6 billion less for the 2022 fiscal year. This is twice the amount the West African country is receiving as relief support from the International Monetary Fund to revive its unstable economy.
The report also showed that the bank’s negative equity stood at ¢55.1 billion ($4.9 billion) at the end of 2022. This means that the bank’s liabilities exceeded its assets. The NDC has also criticized the bank’s spending on motor vehicle maintenance and running, which increased by 114% in 2022.
Addison has denied the allegations of mismanagement, but he has refused to resign. The NDC has said that it will hold a protest at the bank's premises if he does not step down within 21 days.
The BoG entered into a DDEP with the government in 2022, whereby the government exchanged some of its domestic debt for new bonds with lower interest rates. This was done in an attempt to reduce the government's debt burden and free up resources for other spending. However, the DDEP resulted in a significant loss for the BoG, estimated at ¢53.1 billion ($4.8 billion).
Moreover, the BoG has a large exposure to COCOBOD, which is the government agency responsible for cocoa production and marketing. This exposure is due to the fact that the BoG provides loans to COCOBOD to help it finance its operations. However, COCOBOD has been struggling financially in recent years, and this has led to a loss of value in the BoG's exposure.
Lastly, the BoG's assets and liabilities are denominated in both cedis and foreign currencies. When the cedi depreciates against foreign currencies, the BoG's assets lose value, while its liabilities remain the same. This can lead to a loss for the BoG. The BoG incurs interest expenses on the money it lends to banks and other financial institutions. These interest expenses can increase when the BoG raises its policy rate in an attempt to control inflation.
The combination of these factors led to the BoG's record loss of ¢60.8 billion ($6 billion) in 2022. The BoG has defended its actions, saying that it took the necessary steps to stabilize the economy in the face of a number of challenges. However, the allegations of mismanagement have raised concerns about the BoG's ability to manage its finances effectively.
The BoG is currently under investigation by the government's Economic and Financial Crimes Commission (EFCC). The EFCC is looking into allegations of corruption and financial impropriety at the BoG. The outcome of the investigation could have a significant impact on the BoG's reputation and its ability to function effectively.
The situation is a major embarrassment for Addison and the Bank of Ghana. It is also a sign of the growing political instability in Ghana. The country is currently facing a number of economic challenges, including high inflation and a depreciating currency. The IMF is expected to release its assessment of Ghana's economy later this month. This could have a significant impact on the country's political landscape.