GHANA, once celebrated as an economic success story in Africa, now finds itself mired in a financial crisis of unprecedented proportions. In a dramatic display of public discontent, hundreds of protesters flooded the streets of Accra this week, demanding the resignation of the governor of the Bank of Ghana and his two deputies. Their rallying cry? The loss of approximately 60 billion Ghanaian cedis, equivalent to $5.2bn, in the 2022 financial year.
Dubbed #OccupyBoG, the protest was organised by the opposition National Democratic Congress (NDC) party. Clad in red shirts, scarves, and berets, the demonstrators chanted slogans and brandished banners with messages like ‘stop the looting, we are suffering.’
At the heart of the crisis lies the NDC’s accusation that the Bank of Ghana engaged in illegal money printing to lend to the government, resulting in the depreciation of the national currency and rampant inflation. The opposition has also pointed fingers at the bank’s extravagant expenditures, including over $762,000 on domestic and foreign travel (an 87 percent increase from the previous year) and a planned $250 million splurge on a new office building, citing internal audit records.
The NDC’s allegations extend to the central bank’s governor, Ernest Addison, whom they accuse of reckless mismanagement. While the Bank of Ghana has faced past accusations of mismanagement, the scale of the loss in question is unprecedented.
Economist Professor Godfred Bokpin, from the University of Ghana, voiced his concern, telling the BBC, ‘We have never seen anything like this in our history. If the Bank of Ghana wants to recover from this loss… it will take them more than 45 years.’
However, the central bank vehemently denies any mismanagement and attributes the losses to fluctuating exchange rates and the non-payment of loans by state institutions. It also points to the government’s decision to borrow $700 million and not fully repay it as a contributing factor.
Critics have accused the bank’s governors of exacerbating inflation and economic hardship through their actions. Lawyer Martin Kepbu questioned their judgment, asking, ‘The time when they were printing billions for the government, didn’t they know that it would have repercussions?’
So, what led to this dire situation? Ghana is currently grappling with its worst economic crisis in a generation. Inflation rates hit a record high of 54 percent in the previous year and continue to hover above 40 percent. Multiple credit rating agencies have downgraded the nation, making it challenging to secure international loans.
By September 2022, Ghana’s total debt had surged to $55bn, requiring over 70 percent of its income to service the debt—an unsustainable burden. Defaulting on many debt payments became inevitable, compelling the government to seek assistance from the IMF.
To secure a $3bn bailout earlier this year, Ghana agreed to stringent conditions, primarily aimed at reducing debt interest payments by 2028. This restructuring involved renegotiating terms with creditors to lower interest rates and extend repayment schedules, alleviating the strain on public finances.
However, not all creditors participated in this debt exchange programme. On August 9, the Bank of Ghana announced that the government could not fulfil the IMF’s requirements due to insufficient funds. Consequently, the government would not repay half of the $700 million borrowed from the bank, redirecting the
money to debt restructuring and forgoing interest payments.
While the Bank of Ghana is not a commercial bank and can create its own money, experts stress that the central bank’s significant loss has far-reaching implications. It tarnishes the bank’s moral authority to oversee Ghana’s commercial banks and erodes co
nfidence in the country’s financial system.
Bright Simons, a Ghanaian social innovator and writer, told the BBC that the bank’s losses are incomparable to those of other countries due to their scale. He emphasises that the bank’s permissive stance on the government’s fiscal policy enabled reckless spending, allowing the government to live beyond its means.
‘Their attempt to deflect blame and point to losses by other central banks doesn’t make sense as the scale of their losses far outstrips those of other peer banks. A lot of the mess is down to the bank’s accommodative stance on the government’s loose fiscal policy,’ he says.
The human impact of this crisis is profound. A recent World Bank report estimated that approximately 850,000 Ghanaians have fallen into poverty due to high inflation. Incomes have dwindled, affecting purchasing power, and the prices of essential commodities like food, fuel, and utilities remain high. Many households are struggling to make ends meet.
Furthermore, the Bank of Ghana is now under scrutiny from both domestic sources and the IMF. Under the terms of the IMF loan, the bank may have no choice but to refuse additional government bailouts if requested.
Ghana’s financial crisis has rattled the nation and raised critical questions about accountability, economic management, and the path to recovery. As the crisis unfolds, Ghanaians face uncertain times, hoping for solutions to the challenges that have pushed their nation to the brink.
