Financial literacy: Ken Ofori-Atta’s ‘standing strong with the Bank of Ghana’ is understandable

In a recent article authored by Ghana’s Minister for Finance Ken Ofori-Atta, there was a resolute expression of support for the Bank of Ghana (BoG).

This endorsement comes amid the backdrop of pressing economic concerns in Ghana, including excess money supply by the Bank of Ghana, which resulted in alarming inflation figures, heating up to a staggering 54.1 percent in 2022 and currently standing at 40.1 percent.

This soaring inflation has significantly eroded the purchasing power of ordinary Ghanaians, making it increasingly challenging for them to make ends meet.

Furthermore, the article failed to highlight the construction of a new Bank of Ghana edifice, valued at GH¢2.7billion. This decision to build a lavish headquarters for the bank during times of economic crises has stirred controversy and raised questions about the prudent allocation of resources.

While the minister underscored the central bank’s resilience and progress, it is imperative to scrutinize the underlying causes behind the financial management challenges faced by the Bank of Ghana and the far-reaching impacts of these challenges. These issues include not only the substantial loss of GH¢60.8billion in 2022, but also a range of operational expenses, including vehicle maintenance, communication, computer expenses, foreign and domestic travel costs, and the handling of waivers or write-offs. Understanding the root causes and their implications is vital for charting a course toward economic stability and effective financial management.

Losses and prudent financial management: The central theme of the article is the assertion that central banks, including the BoG, can run on negative equity and incur losses to support economic recovery. While this assertion is true, it is essential to distinguish between losses incurred in pursuit of strategic objectives and losses arising from deficiencies in financial management.

Vehicle maintenance expenses:
Cause: The significant increase in fuel costs (123.3 percent) and overall vehicle maintenance expenses is inconsistent with prudent financial management, especially given the scale of operations and the impact on the bank’s financials.
Impact: The surge in fuel costs and related expenses due to rising petrol and diesel prices, coupled with exchange rate effects, has contributed to higher operational costs. Prudent financial management would involve closely monitoring and managing such cost fluctuations to minimize their impact on the organisation’s financial performance. In any case, who’s responsible for price stability?

Communication expenses:

Cause: While electronic data transmission charges constitute a significant portion (57.4 percent) of communication expenses, the increase in overall communication costs should be assessed against the benefits and necessity of the services provided.
Prudent management: Prudent financial management involves cost-benefit analysis and efficient allocation of resources. The bank should ensure that communication expenses are justifiably incurred and directly contribute to the bank’s core functions and objectives.

Computer expenses:
Cause: The substantial increase in computer expenses due to asset replacement, especially in the context of exchange rate depreciation and inflation, highlights potential oversights in budgeting and financial planning.
Prudent management: Prudent financial management would require careful planning for asset replacement and considering the impact of currency fluctuations. It’s important to assess whether the replacement policy aligns with the bank’s strategic objectives and if cost-effective alternatives were considered.

Foreign and domestic travel expenses:
Cause: The impact of exchange rate and inflation effects on travel expenses indicates a lack of proactive measures to manage and control these variable costs.
Prudent management: Prudent financial management involves forecasting and budgeting for variable costs while considering cost-containment measures. Ensuring that travel expenses are essential and directly contribute to regulatory and development functions is crucial.

External directors’ expenses:
Cause: Inflation and exchange rate effects impacting external directors’ expenses underscore the need for more robust financial risk management practices.
Prudent management: Prudent financial management would involve assessing the impact of inflation and exchange rate fluctuations on various expenses – including external directors’ fees – and implementing strategies to mitigate these effects.

Waiver or write-offs and IFRS compliance:
Cause: The issue of potential waivers or write-offs without proper parliamentary approval raises concerns about adherence to financial regulations and accountability standards.
IFRS compliance: The bank should ensure that any debt restructuring, waiver or write-offs comply with IFRS requirements, particularly in terms of expected credit loss (ECL) provisions. While the minister’s intentions are noted, compliance with parliamentary and regulatory approvals is essential for transparent financial management.

Inconsistencies in BoG’s losses:
The article points out that several central banks globally have experienced losses, but it fails to address the key question: What led to these losses? In the case of the BoG, the losses can be primarily attributed to the significant impairment provision related to the government’s debt exchange. While the government’s debt operations may have been necessary, it is crucial to examine the implications of these actions on the central bank’s balance sheet and the broader financial stability.


Transparency and accountability:
The article advocates for support of the BoG in these challenging times. However, supporting a critical institution should not preclude the need for transparency and accountability. The central bank’s losses and the impact of debt operations should be subject to thorough scrutiny and discussion, especially within the framework of prudent financial management.

Governance structure and independence:
The minister briefly touches on the need to debate the governance structure of financial institutions, including the BoG. However, this is a critical issue that deserves more attention. The roles of the Chairman and Governor, for instance, have a significant impact on the effectiveness and independence of the central bank. Robust debates on these matters are essential for effective governance.

The path forward:
The minister rightly highlights the progress made in various sectors of Ghana’s economy. However, acknowledging the challenges faced by the BoG and advocating for support should not deter stakeholders from examining the root causes of financial losses. A more comprehensive approach to addressing these issues will ensure that Ghana’s economic progress remains sustainable.

In conclusion, while the minister’s article highlights the need for support during challenging times, it is equally essential to address the underlying issues contributing to the Bank of Ghana’s substantial losses. Prudent financial management, transparency and accountability remain crucial principles in sustaining economic growth and stability. A balanced and thorough evaluation of the situation will lead to more effective solutions for Ghana’s economic challenges.



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In a recent article authored by Ghana’s Minister for Finance Ken Ofori-Atta, there was a resolute expression of support for the Bank of Ghana (BoG).