NDC is funny, ignore them - John Kuman reacts to alleged collapse of BoG

Deputy Minister for Finance, Dr. John A. Kumah has urged Ghanaians to ignore the comments being spread by the Minority in Parliament that the Bank of Ghana has collapsed.

According to the Deputy Minister for Finance, the comment from the opposition National Democratic Congress (NDC) was just to unnecessarily attack the credibility of the Central Bank.

To the Ejisu MP, such comments result in panic selling of assets which could have a diverse effects on the economy.

"Such propaganda and unnecessary attacks at the central bank only results in increased market volatility, panic selling of assets, and can trigger a chain of events that can affect our overall economic stability".

The Deputy Minister's response follows a presser addressed by the Minority Leader, Ato Forson accusing the Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, of allocating GHS250 million to construct a new head office complex at a time the institution is facing financial challenges.

Dr. Ato Forson claimed that the Governor has resorted to money printing to fund this project due to the alleged lack of funds within the BoG.

“The Bank of Ghana does not have money but spending GHS250million for a new head office, which means he is printing additional money to finance this project,” the Ajumako-Enyan-Esiam MP said.

He further threatened that "We demand the immediate resignation of the Governor and his deputies within 21 days. We will march to occupy the central bank to save the Bank of Ghana if he fails to reign. The March will ensure accountability".

But, reacting to the NDC accusations, Dr. John Kumah said the main source of income to the Bank is from government transactions i.e. fees on all government transfers, the bank's investments in marketable instruments and also earnings from non-marketable holdings of the Bank.

He explained that "The NDC is funny! It's not true that a recapitalization levy is to be introduced for BoG, the Central Bank hasn't collapsed".

Justifying some of his reactions, he noted that "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".

Dr Kumah further explained that 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, most Central Banks around the world run negative balances to achieve the overall economic anchor objectives of a Central Bank" Dr Kumah stated in a post on his Facebook page.

“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" he added.

"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"

Meanwhile, in response to these challenges, the BoG outlined measures in its Annual Report to mitigate the situation and recover its financial stability.

These measures include retaining profits to rebuild capital until equity returns to positive levels, refraining from monetarily financing the government’s budget, optimizing the investment portfolio and operational cost mix, and considering potential government recapitalization support in the medium to long term.