Dr. John Kwakye, the Director of Research at the Institute of Economic Affairs, has criticized the Bank of Ghana for allowing its financial stability to be jeopardized by a section of the Bank of Ghana Act that allows the central bank to lend money to the government.
He expressed disappointment that the Bank of Ghana has illegally printed $3.3 billion for the government and only received a piece of paper in return. According to Dr. Kwakye, this will have a significant negative impact on the Bank's balance sheet.
Ghana plans to convert $3.3 billion of loans owed to its central bank into bonds, which will make it the largest holder of domestic government securities and subject it to the ongoing debt restructuring process. The bonds, issued by the finance ministry, will also cover interest owed to the Bank of Ghana. However, Dr. Kwakye warned that this could potentially lead to the central bank becoming bankrupt.
He also criticized the financial recklessness of the Bank of Ghana and the Ministry of Finance for lending more money than the act allows. The securitized central bank loan is expected to be added to the list of domestic debt under restructuring.
The new bonds will bring the central bank into the ongoing debt restructuring process, in which the government is asking investors to exchange $11.2 billion worth of local government securities for new notes with less favorable terms. The deadline for the voluntary exchange is February 7, 2023.
