The National Democratic Congress (NDC) is heavily descending on the Bank of Ghana (BoG) and inciting the ordinary Ghanaian to attack our Central Bank.
First, the opposition party directly or indirectly came out with a publication, “Bank of Ghana Bankrupt – The BoG’s Recklessness and Mismanagement,” which catalogued things that alleged that a few individuals were operating the Bank like it was a private entity and illegally enjoying benefits, to the detriment of the state.
Bank of Ghana may be broke, but not bankrupt or insolvent. Firstly, to be broke means to, not currently have a lot of money. That’s all it means and nothing else.
Secondly, to be bankrupt is a legal process, this is undertaken when an individual can no longer afford to pay off their debt. This applies to individuals and not to limited companies or partnerships. So, by this definition, the situation BoG finds itself today cannot be said to be a case of bankruptcy.
Insolvency is a state of financial being. When you’re insolvent, you can no longer pay your debts when they’re due. Either an individual or a business can be said to be insolvent, but the term is most often used to refer to businesses.
A business can become insolvent in one or both of two ways. Cashflow and balance sheet insolvency.Insolvency can happen quicker than you think. A slippery slope to debt can start with: a cash flow crisis; loss of business contract; loss of customers or services not becoming relevant with changing needs and markets. Unexpected and unaccounted for costs, such as lawsuits, can also lead to insolvency.
With these explanations, BoG cannot be said to be insolvent or bankrupt, which is the word the NDC wants to use on the Central Bank.
The Bank of Ghana in trying to resolve the country’s debt situation, paid up some of the debt we owed. That is one of the mandates of a Central Bank. When any bank is facing liquidity problems, the Central Bank may choose to recapitalise it by paying off its debts and given it something to start off afresh.
This is what BoG did when Ghana faced serious financial challenges. And here it has no excuse to back out and watch Ghana become insolvent. The Bank of Ghana is like an agency under the Ministry of Finance and must be seen to make sure Government of Ghana (GoG) functions well.
The question is how come, GoG run into liquidity problems? After running the economy very well in the first four years, with good results showing in our trade balances and inflation rates, the country was hit by global crisis: Covid-19 and Russia-Ukraine war. GoG knew that only taxation will maintain cash flow and so decided to implement a low-rate tax of 1.50% on financial transaction called E-Levy.
The NDC knowing that this could keep government out of financial crunch, resolve to demonise it and used its numbers in Parliament to halt the E-Levy. When in government, the NDC implement a 17.5% VAT on Financial Transactions but resolved to halt a 1.50% tax, on same.
The long delay in the implementation of the E-levy landed Ghana into financial problems, and with other adversities, we had to take a trip to the IMF. Against the propaganda spread by the NDC that the economy was poorly managed, the Bretton Woods Institution said our problems were due to Covid-19 and Russia-Ukraine war and not mismanagement.
Not satisfied with unwarranted attacks on GoG, the NDC are out again attacking BoG for recklessly misusing funds, and here again, IMF found nothing wrong, but blame the situation on the domestic debt exchange (DDE).
Now the attacks have shifted to the construction of a new BoG building which is put at $ 250 million, which the NDC is saying, it is misplaced priority. Firstly, the Bank of Ghana needs a new office building. The current office block was constructed to contain not more than 300 workers. To operate in a more modern environment, with state-of-the-art equipment and machinery andto be abreast with world leading central banks, and to contain its over 1,500 members of staff, BoG needs a new and a much bigger office building.
Interestingly, the decision to construct a new building began in the 90’s and the actual construction work started during the era of NDC’s JEAM/JDM government.
Just as the NDC who initiated Ghana participation in the HIPC Initiative, but blamed the NPP for going HIPC, the NDC is here again blaming the NPP for continuing the construction of a new BoG block.
Then comes the news that BoG spent GH¢2 million on give-away wrist watches for seventy-two retiring staff. This event actually took place during the JEAM/JDM NDC’s administration and yet the current NPP era is blamed for this.
And the NDC MPs are saying what? That the call for resignation of the BoG governor and his deputies is non-negotiable? Are they carrying out the mandate given to them by their electorates by choosing to boycott sittings in the House and rather go to courts that are trying their colleagues for criminal acts? And at the end of the day, they will collect their salaries. Causing financial loss to the state, that’s it.
Fabrication of stories is not what we need now. BoG’s governor and deputies are doing their best to keep Ghana afloat.
Hon. Daniel Dugan
The views expressed in this article are the author’s own and do not necessarily reflect The Chronicle’s stance.
