Financial expert Dr. Richmond Atuahene is proposing several innovative ways for the government to recapitalize the Bank of Ghana (BoG) without putting too much pressure on the finances of the government.
These measures are believed to have the capacity to strengthen the BoG’s financial position while minimizing the fiscal burden on the government.
Following the unprecedented GHC 60.8 billion loss of the Central Bank in 2022 due to the Domestic Debt Exchange Program (DDEP), there have been calls for the government to step to salvage the situation.
Given the magnitude of the loss, the Bank needs over GHC 50 billion to strengthen the financial position of the national bank.
Unfortunately, Minister for Finance Dr. Cassiel Ato Forson has insisted that the government will not expend the taxpayers’ money to revitalize the bank. He, therefore, recommended that the new leadership of the bank should find internal and innovative means to strengthen the balance sheet, including leasing its new luxurious headquarters.
But the financial analyst believes that considering the gravity and the possible impact of the situation on the economy at large, the government cannot sit aloof.
In a research paper copied to The High Street Journal, Dr. Atuahene explains that BoG’s negative equity not only erodes its credibility but also compromises its ability to implement effective monetary policy. He says there is a need for a strong central bank balance sheet, which is essential for safeguarding both independence and public trust:
The financial analyst further explains that without sufficient capital buffers, the Central Bank risks being perceived as incapable of managing its liability, thereby inviting skepticism from both the financial market and the general public.
The situation, he says, makes it imperative for the government to find innovative means to recapitalize the bank. He is, therefore, proposing seven strategies for the government to implement to strengthen the bank.
Let’s take a look,
Leveraging Natural Resources
Dr. Atuahene proposed leveraging Ghana’s vast natural resources as a means of raising funds for the central bank’s recapitalization. “The government can monetize its natural resource assets to generate much-needed capital without resorting to direct budgetary allocations,” he explained.
Diaspora Bonds
The financial analyst is recommending that the government tap into the inward remittance space. He is suggesting issuing Diaspora Bonds, allowing Ghanaian citizens abroad to invest in the country’s financial stability. “Ghana’s large diaspora community is a valuable source of financial support. Properly structured diaspora bonds could inject significant capital into the BoG,” he noted.
Issuance of Government Securities
Another approach recommended by Dr. Atuahene is the issuance of government securities to the central bank. By transferring interest-bearing, marketable securities, the government could bolster the BoG’s balance sheet without immediate cash outflows.
Suspension of Profit Transfers
The suspension of profit transfers was also highlighted as a means to rebuild the central bank’s capital over time. Instead of forwarding its profits to the state, the BoG could retain earnings to strengthen its financial standing.
Asset Transfers
Dr. Atuahene further proposed asset transfers as a means of recapitalization. By moving state-owned assets into the central bank’s portfolio, the government could improve BoG’s equity position without injecting cash directly.
Sale or Lease of Non-Core Assets
In addition, he pointed out that the sale or lease of non-core assets, including the BoG’s stake in ADB Bank and real estate holdings, could generate additional funds to support recapitalization efforts.
Internal Revenue Generation
Finally, he urged the central bank to explore internal revenue generation strategies by optimizing its foreign reserve portfolio and financial operations to improve liquidity and capital levels.
With these proposals, Dr. Atuahene says the government must act swiftly and strategically to restore the Bank of Ghana’s financial strength while avoiding additional fiscal pressure. He warned that failure to implement these measures could undermine investor confidence and the effectiveness of monetary policy in the long run.
