How Ghana's central bank lost $5bn in one year

Ghana, once celebrated as a beacon of African economic success, now stands on the precipice of an unprecedented financial crisis, sending shockwaves through its vibrant streets. 

In the heart of the capital, Accra, a chorus of dissent reverberates as hundreds of protestors take to the sun-drenched avenues. Their collective outcry demands accountability and change. Their target? The governor of the Bank of Ghana and his two deputies, who stand accused of presiding over the loss of a staggering 60 billion Ghanaian cedis (equivalent to $5.2 billion or £4.3 billion) during the tumultuous financial year of 2022. 

This spirited assembly, aptly named #OccupyBoG, is led by the opposition National Democratic Congress (NDC) party. Clad in a sea of crimson, protestors don red shirts, scarves, and berets, their voices rising as one, punctuated by chants and banners bearing slogans such as "stop the looting, we are suffering." 

The allegations are grave: the opposition contends that the central bank clandestinely printed money to bolster government coffers, a reckless maneuver that triggered a precipitous depreciation of the national currency and unleashed the scourge of crippling inflation upon the populace. 

Moreover, the Bank of Ghana faces accusations of profligacy in the face of austerity, with an eye-popping $762,000 spent on domestic and foreign excursions, marking an 87% surge from the preceding year. An additional $250 million is earmarked for the construction of a lavish new office edifice. The opposition vehemently insists these figures are inscribed within the annals of an internal audit. 

Dr. Ernest Addison, the central bank's governor, bears the brunt of accusations. He stands accused of recklessness and mismanagement, allegations that reverberate with unprecedented intensity. "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," remarks Professor Godfred Bokpin, an esteemed economist from the University of Ghana. 

In the midst of this storm, the bank staunchly refutes charges of mismanagement, attributing the staggering losses to the tumultuous fluctuations in exchange rates and the non-payment of loans by state institutions. The government's decision to borrow $700 million and not return it in full is also cited as a catalyst for the current turmoil. 

Yet, amidst the cacophony of discontent, the bank's governors find themselves accused of fanning the flames of rampant inflation and economic hardship through their actions. "The time when they were printing billions for the government, didn't they know that it would have repercussions?" asks the incisive lawyer, Martin Kepbu. 

Why has this happened?

Ghana currently finds itself entangled in the grip of its most severe economic crisis in a generation, a tempest of financial turmoil that has swept through the nation like an unyielding storm. In the annals of economic challenges, the year 2022 etched its somber mark as the year when the inflation rate surged to a harrowing 54%, casting a lingering shadow of financial despair that still looms at over 40%. The nation's financial reputation lay in ruins, with multiple credit rating agencies stripping away its international borrowing privileges.

As September 2022 dawned, Ghana's debt had ballooned to a staggering $55 billion, an imposing mountain of financial burden that loomed ominously on the horizon. It was a debt of such magnitude that it demanded over 70% of the government's income merely to service it—an insurmountable feat. As a dire consequence, the nation found itself defaulting on a substantial portion of its debt obligations.

In this time of fiscal desperation, the government turned to the International Monetary Fund (IMF) for a lifeline, seeking refuge in a $3 billion bailout package earlier this year. However, this rescue came with a steep price—the government was compelled to adhere to a stringent set of prerequisites.

Foremost among these demands was the imperative to rein in the spiraling interest payments on the nation's debt, slashing them to a manageable level by the year 2028. This would provide the breathing space necessary to navigate the treacherous waters of financial instability.

To achieve this formidable feat, Ghana's government embarked on a journey of debt restructuring, engaging in a delicate dance of negotiation with its creditors. Proposals were laid forth, tempting lower interest rates on loans and extended repayment terms, all designed to alleviate the crushing burden on public finances.

However, in this intricate financial ballet, not all partners were willing to join the choreography. Some creditors staunchly refused to partake in this debt exchange program, casting a shadow over the delicate equilibrium.

Then, on a fateful day in August, the Bank of Ghana issued a solemn proclamation, conveying the government's somber truth—there simply wasn't enough in the coffers to meet the IMF's unyielding requirements. Consequently, it was declared that half of the $700 million borrowed from the bank would not be repaid as initially promised. Instead, these funds would be redirected toward the Herculean task of debt restructuring. Moreover, any accrued interest payments to the bank would also be left unpaid—a stark testament to the nation's financial distress.