The Minister for Finance, Ken Ofori Atta, has disclosed that the size of our economy has doubled from a GDP value of GHS219.6b in 2016 to GHS610.2b as at last year.
The Minister made this known in a statement released yesterday in defense of the Bank of Ghana, over the GHS 60b loss in 2022.
“The size of our economy has also more than doubled from a GDP value of GHS219.6b in 2016 to an estimated GHS 610.2b 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”, he said.
The Minister commended that the Central Bank has been prudent, strong, resilient and functioning efficiently.
“Our Central Bank’s assets have grown almost in tandem with the size of our financial sector and economy. From GHS53b in 2016, the Bank’s assets have grown by nearly one and half to GHS126b as at the end of 2022.
“The foundation has never been conspicuous – our revenue has more than doubled since 2016, with total revenue increasing from GHS32b in 2016 to GHS96.7 (end December 2022)”, he defended.
Citing a quote, he said “Banks are to the economy what the heart is to the human body. They cycle necessary capital through the whole and they are barely noticed until pressure, necessity or crises”.
Mr. Ofori Atta continued that all Ghanaians could attest to the progress made in digitization, infrastructure, the armed forces and police, public spending on education, agriculture (cocoa and PFJ), health and school feeding among others.
Spending on the education sector, which Mr. Ofori Atta indicated included the universities, second-cycle institutions and basic schools collectively constitute about 20% of tax revenue and include compensation, goods and services, and GETFund spending on infrastructure, while the health sector consumes about 8-10% of tax revenue, among others.
“However, the 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, must be deployed 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 like Ghana”, Ofori Atta stated.
He continued to defend that the Bank of Ghana in managing its balance sheet issues currency, conducts foreign exchange operations, invests its own funds, engages in emergency liquidity assistance, conducts monetary policy operations and liquidity management.
Also, he asserted that BoG serves as a banker to Government, which role may include bridge financing to support budget, in line with the applicable laws.
“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”, the minister noted.
The finance minister added that the modern economic policy consensus is clear, thus the central banks can and run on negative equity and they can make losses to support economic recovery.These losses will not be counted as failure, as in commercial banks and enterprises.
This, he said, all and sundry must, in these extraordinary times, deploy all the instruments available and sail together through this odyssey and as such the call for citizens is not to be seen as punishing the Bank of Ghana for pitching up to support the greater public good.
The finance minister contended that the government’s debt operations that commenced in 2022 and executed this year, had a 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 GHS42.3b of Government’s domestic debt, out of the total (domestic) debt stock of GHS194.3b. This debt holding, in addition to others, resulted in a loss impairment provision of about GHS48b for the Bank in 2022
“As indicated by the IMF, the BoG was the loss absorber for the debt exchange to ensure that in the 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 Domestic Debt Exchange Programme, which will ensure the NPV of the stock of public sector debt is halved from the then 105 percent of GDP (later recalculated as 89%) to 55 percent 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 report, 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”, he said.
