Central Bank Governor Justifies Recapitalization PlanCentral Bank Governor Justifies Recapitalization Plan Dr. Ernest Addison, Governor of the Bank of Ghana, has defended the decision to increase the bank’s capital. He emphasized that it will bolster the bank’s credibility in implementing reforms outlined in a forthcoming Memorandum of Understanding (MoU) with the Ministry of Finance. During a joint press conference on July 1, 2024, Dr. Addison stated, “Sustained stability and commitment are crucial to implement the structural reforms outlined in the program, including signing the MoU between the Ministry of Finance and the Bank of Ghana on the recapitalization. This will enhance the central bank’s credibility to effectively implement its reforms.” Background of the Recapitalization Plan In June 2024, the central bank announced its intention to sign the MoU after experiencing two consecutive years of significant losses. The MoU aims to restore the bank’s financial health and establish a positive equity position following losses of GHS10.5 billion in 2023 and GHS60.9 billion in 2022. Memorandum of Understanding The Ministry of Finance and the Bank of Ghana will sign the MoU to ensure the central bank can fulfill its mandate of managing monetary policy and maintaining price stability. Components of the Recapitalization Plan The recapitalization plan includes an assessment of the required capital, the timeline for recapitalization, and potential sources of funding.
Dr. Ernest Addison
The Governor of the Bank of Ghana, Dr. Ernest Addison, has justified the drive to recapitalise the central bank.
He said this will strengthen their credibility in implementing reforms planned under a memorandum of understanding his organization will sign with the Ministry of Finance.
Dr. Addison said this during a joint press conference of the Ministry of Finance, the International Monetary Fund and the Bank of Ghana in Accra on July 1, 2024.
“Stability and commitment are needed from now until the end of the year to implement all the structural reforms envisaged in the programme, including the signing of the Memorandum of Understanding (MoU) between the Ministry of Finance and the Bank of Ghana on the recapitalisation of the central bank. This will strengthen the credibility of the central bank to effectively implement its reforms,” he explained.
In June 2024, the central bank announced its intention to sign the MoU after posting significant losses for two years in a row.
The MoU is a strategic move to restore the central bank’s financial health and increase its positive equity position after the bank incurred a GHS10.5 billion loss in 2023 due to high expenditures related to monetary interventions and a GHS60.9 billion loss in 2022 due to write-offs during the domestic debt swap programme.
The Ministry of Finance and the Bank of Ghana sign the MoU to ensure that the Central Bank can continue with its mandate to manage monetary policy and ensure price stability.
The recapitalization plan looks at the capital required, the timeline for the recapitalization and, more importantly, the sources of financing.
