BoG blames cedi depreciation, inflation for rise in operational expenditure

The Bank of Ghana (BoG) said inflation and exchange rate movements in 2022 had a significant impact on the operations of the bank

The Bank of Ghana (BoG) has attributed the “sharp jump” in its operational expenses to largely the “sharp” depreciation of the Ghana cedi against the dollar and the rise in inflation in the 2022 financial year.

The BoG said the two variables impacted its vehicle maintenance, communication, foreign and domestic travels, and External Directors expenses among other operational demands.

Responding to some accusations of mismanagement by the Minority in Parliament, the BoG said inflation and exchange rate movements in 2022 had a significant impact on the operations of the bank and every other entity in the country.

The Central Bank said the year 2022 was the peak of economic and social crisis in Ghana and added that “comparing 2022 financial performance with 2021, without taking cognisance of the economic situation in the country is misleading”.

Explaining what accounted for the rise in its vehicle maintenance expenses, the BoG said: “For 2022, the fuel cost increased by 123.3% compared to 28.9% in 2021.

This was on the back of petrol and diesel prices increasing from GHC6.6618 per litre of petrol, and GHC6.665 per litre of diesel at the end of 2021 to GHC16.5811 per litre of petrol and GHC19.6053 per litre of diesel at the end of 2022. This implies increases of 149% (Avg. 87%) and 194% (Avg. 122%).”

On the issue of waiver or write offs without recourse to Parliament, the BoG explained that the Minister for Finance in his 2023 Budget Statement, which was approved by Parliament, had the policy of debt restructuring as a key policy initiative.

The central bank said any further discussion on parliamentary approvals beyond what was approved in the 2023 budget would be handled by the Ministry of Finance.

“Secondly, beyond the parliamentary approval, the IFRS accounting standard, which requires the full implementation of the Expected Credit Loss (ECL), meant that the mere announcement by the government of a debt restructuring would trigger ECL applications and impairment charged. On this score, the issue of parliamentary approval or not would not stop an ECL application and impairments on the books of BoG,” it said.

Touching on the new BoG headquarters, the central bank said its current office, which was constructed in the early 1960s “is no longer fit for purpose and could not stand any major earth tremors”.

It said in keeping with the strategic objective of positioning Ghana as the financial hub of the sub-region, with prospects of a potential headquarters for a future regional central bank, the board and management of the Bank of Ghana considered a new head office building as the most important priority project to support the operational efficiency of the Bank.

“…the main building does not satisfy the full complement of excess strength required for a building to be considered safe for usage. This means that in the case of a worst-case gravity and wind loading scenario, for example, unusually strong wind, the building may be significantly affected,” it said.

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