Banking and financial consultant, Dr. Richmond Atuahene, has backed the government’s decision to recapitalise the Bank of Ghana (BoG), describing it as necessary to restore confidence.
Despite the welcoming news, he warns that the move will inevitably come with fiscal consequences.
Speaking in an interview on JoyNews, monitored by The High Street Journal, Dr. Atuahene said while the central bank may remain policy-solvent, rebuilding credibility and public trust is just as critical.
“For me, it is a step in the right direction,” he noted, stressing that confidence in a central bank is as important as its balance sheet strength.
Credibility: The Core Objective
According to him, the recapitalisation goes beyond technical financial stability. It is about restoring faith in the central bank’s ability to manage the economy effectively.
Recent challenges have put the spotlight on the BoG’s financial position, making the case for fresh capital injection unavoidable.
He indicated that whether the country likes it or not, it has to recapitalise it.
“It’s good news, I mean, because the sovereignty of the bank, although policy solvent, but unfortunately, credibility and public confidence is also part of the central bank issues. So for me, it is a step in the right direction,” he indicated.
No Easy Way Out on Debt
However, Dr. Atuahene was quick to caution that the process cannot be separated from its impact on Ghana’s public finances.
He explained that recapitalisation, especially through bond issuance, will add to the country’s debt burden, either directly or as contingent liabilities.
Dr. Atuahene stresses that there isn’t much the government can do about the impact. Irrespective of the model used, there will be fiscal implications.
Even alternatives such as cash transfers or structured instruments ultimately feed into the broader fiscal framework, affecting debt levels and government obligations.
“Whether we even did a cash transfer, there will always be an impact on the fiscal policy and the national debt. Whether you like it or not, we have to recapitalise it. And you cannot evade the fiscal policy issues in increasing debt, because bonds, as you know, are a contingent liability to be issued, and how it’s going to be done; there are two ways to do it. One will go with interest. And then, as the bank went into profitability, they started paying back,” he explained.
Learning from Global Precedents
Dr. Atuahene pointed to international examples, including the United Arab Emirates, which recapitalised its central bank during the 2008 financial crisis through bond issuance.
In that case, he explained, the central bank later returned to profitability and was able to service the obligations, offering a possible pathway for Ghana.
One approach, he suggested, is to issue interest-bearing bonds, allowing the central bank to gradually repay as its financial position improves.
The Bottomline
While the fiscal cost may be unavoidable, the analyst believes the long-term benefits outweigh the immediate burden.
Restoring credibility at the central bank level, he argues, has ripple effects across the entire economy, from investor confidence to monetary policy effectiveness.
Dr. Atuahene believes recapitalising the BoG is not optional; it is essential. But policymakers must proceed with full awareness of the fiscal trade-offs involved.
