BoG must cut spending, avoid any increase in wages and benefits – Economist

BoG Governor Dr Ernest Addison

Ghanaian economist, Julius Gyimah, has advised the Bank of Ghana (BoG) to take steps to turn around the country’s fortunes and reduce subsequent losses to avoid adverse economic repercussions.

He was responding to the central bank’s loss of GH₵10.50 billion for the financial year ending 2023.

He stressed the need for the bank to be prudent, maintain fiscal discipline and reduce its expenses as measures to ensure it posts more profit than losses for the next financial year and beyond.

Bank of Ghana has posted a loss of GH₵10.50 billion for the financial year ending 2023.

Data released by the bank indicated that the loss was primarily due to a substantial increase in total interest expenses related to the Central Bank’s open market operations.

This expenditure on open market operations increased by GH₵6.7 billion during the period under review.

In an interview with Rainbow Radio 87.5FM’s Frontline, the economist suggested that the documented losses may not have been deliberate.

He explained to Kwabena Agyapong on Rainbow Radio 87.5FM that as part of the bank’s mandate, it assumes financial risks such as credit risk and interest rate risk through lending to commercial banks or governments, or currency risk through holding foreign currency. reserves.

He stated that by doing so, the BoG could incur losses, which are necessary to ensure the smooth functioning of the economy.

The financial system plays a crucial role in maintaining economic stability by stabilizing inflation and economic activity.

He noted that compared to the previous financial year, the bank recorded a reduction from the GH₵60 billion it recorded in 2022.

He noted that some gains could be seen from the data released, but quickly added that the bank should adopt strategies to help it cut its losses.

Mr. Julius Gyimah warned that if these losses are repeated in the coming years, they may create serious economic problems, including higher rates of inflation.

“Already, with our arrangements with the International Monetary Fund and the supply of dollars, the BoG is no longer injecting dollars into the economy, unlike before. In the past, when the Fiscal Operations Department of the Ministry of Finance was unable to generate dollars into the system, it quickly wrote to the BoG to inject money into the economy.”

“So if the BoG is unable to change the fortunes of this current situation in the coming years, it will create a serious crisis. We still have to pay our foreign debts, which we service in dollars. The bottom line is that if we do it. It doesn’t help the bank make profits, they will have to depend on our reserves, which will create a dire situation.”

He advised them to show empathy towards Ghanaians, avoid increase in staff allowances and expenses and suspend unnecessary expenditure to reflect the current economic situation.

“Despite previous gains, the cost of living and inflation will peak. The Board of Governors should cut their spending. This is not the time to increase their allowances and salaries. They should be more empathetic with the public. If they can stop some of the spending them, it will be a step in the right direction and will reflect the current circumstances. This is not the time for extravagance.

He asked the Ministry of Finance to also implement policies to reduce spending, increase exports, reduce imports and protect our economy by investing more in production and manufacturing to generate the growth we want.