Adongo’s full speech on State of Ghana’s Economy: Myths and Truths

Isaac Adongo
Isaac Adongo


Good afternoon to all of us here and those listening and watching us on radio, television and social media platforms

  1. I am deeply honoured by your presence to grace this lecture. As citizens of this blessed nation, we are all partners of its progress. Irrespective of who we are, where we are and what we do, our actions, inactions and voices shape the collective being of the land called Ghana. That is partly why I am extremely grateful that in achieving that golden objective, the dozens of you seated here and those participating through other mediums have chosen the path of intellectual discourse in advancing the progress of our dear country. It is one route that can help return our country back to the path of sustained prosperity.
  2. Mr Chairman, On March 22, the Finance Minister, Mr Ken Ofori-Atta, headed NPP members at the ministry and other government officials to eat kenkey and drink fanta in celebration of their so-called hat-trick of successes. Six days after, he stampeded his boss, the Vice President, to address Parliament on how they have magically turned Ghana from a Biblical Egypt to a land of Canaan, flowing with milk and honey. Then, just yesterday, the world’s best economist and originator of the Mallam Atta Market Inflation Theory, Dr Bawumia, took to a townhall meeting to parrot what he and his team has achieved for Ghana.
  3. Observing them from afar, it reminded me of a quote in the gripping novel, Things Fall Apart, by one of Africa’s most decorated poet, Chinua Achebe. It says “The lizard that jumped from the high Iroko tree to the ground said he could praise himself if no one else did.”
  4. The NPP, recognising that nobody is blinking to what they regard as successes, decided to create avenues to praise themselves. But knowing who you are, knowing who Ghanaians across the country are, I am convinced that your silence on the government’s so-called successes is not a sign of ungratefulness. For I am reminded that when our own H.E John Dramani Mahama built infrastructure across the nooks and crannies of this country, made our ports competitive and  supported importers, created real jobs and kept our education system together, not in shambles, you watched and listened, young and old, male and female; people across the political divide responded with gracious hearts.
  5. This is why I am convinced that this current silence is a mark of silent frustration over the hardship and bouts of embarrassments that we all are enduring under the Akufo-Addo/Bawumia administration. It is obviously the resentment of all of us, Ghanaians to the coma that the NPP government has placed our education sector into, where basic schools are denied funds to operate and as such, teachers have been forced to improvise, including bringing back the long-abandoned ordeal of writing exam questions on chalkboards at a time a Digital Fanatic is our Vice President; It is a sign of our anguish over the current inability of BECE Candidates nationwide to write their usual second but final Mock Exams due to lack of funds to print exam questions; It is because our currency, the revered cedi, is now a laughing stock, carrying with it on consistent bases, the contemptuous tag of being the worst performing currency in Africa and fourth worst performer globally; it is because after sending more than 4,000 of our brothers and sisters home under ‘a face-looking’ banking sector clean up exercise, the NP still has the audacity to set aside over GH¢8.5 billion to collapse microfinance institutions, savings and loans companies and other non-bank financial institutions and deprive many more of  our people of their jobs. And it is even because upon all these glaring defects in our country, the NPP goes about asking you and I to clap for them because they have introduced Free SHS. That is the more reason why our gathering here is even more pertinent.
  6. Ladies and gentlemen, at a time when spinning and propaganda are now prepared at the Bank of Ghana, cooked at the Ministry of Finance and shamelessly dished to Ghanaians from the Flag Staff House, there is an urgent need to critically examine the status of our economy using a superior, fact-based and unbiased analysis and interpretation of data in a manner that is devoid of warped logic and symptoms of selective amnesia. Join me, therefore in thanking the organisers of this programme, the Coalition For Restoration (CRF), who, through the National Executives of the Great NDC have put this together under the theme:

The State of Ghana’s Economy: Myths and Truths.’

  • To deal with the topic, we explore the fiscal situation of our country, the challenges of the financial sector, the state of the external sector, exchange management, how we fared under the IMF Programme and conclude with an exposition on Ghana’s hat-trick of embarrassment. Let me assure Ghanaians as you might have been used to parroted lectures laced with insults, this lecture is one based on data and reality.
  • Let me sound a word of caution to the Walewale Adam Smith the economic management is a very serious business and credibility therefore is a very important asset a country needs. It is for this reason that the obvious untruths and in some cases, palpable lies has badly dented the image of the country. Permit me to point out a few of the deceptions, lies and untruths that Dr Bawumia delivered at the Town hall event yesterday.
  • Dr Bawumia claimed that as a result of the IMF conditions, the BOG could not intervene in the market to stabilise the cedi. This is a very serious dishonest and a major credibility blot on Ghana. Data released by the BOG last week indicated that Ghana’s net international reserves at the end of 2018 was $3,8 billion which declined to about $3.1 billion by the of February 2019. This means that the BOG had pumped $700m of our hard earned net international reserves to stabilise the cedi. This is a clear dishonest by Dr Bawumia.
  • The same data from BOG puts Ghana’s NIR at the end of 2017 at $4.5 billion. With the reported figure of $3.1 billion for end of February 2019, the BOG had spent about $1.4 billion of reserves to support the cedi. It is a very worrying development for the Vice President to have elections through lies and continue to want to stay in power through lies. Has the Government been lying to the IMF all along?
  • The posture of Dr Bawumia to the effect that Government was waiting for exit the IMF so they can freely pump and risk our hard earned foreign currency created a very serious negative response by the market yesterday. The cedi immediately faced a major attacked and ended trading at Ghc5.6 to the 1US$ per Bloomberg report.
  • The cedi immediately reversed its gains in the last few days and quickly resumed its unenviable position as the worse performing currency in Africa and the 4th worse currency in the world by Bloomberg.
  • Dr Mahmoud Bawumia indicated that Ghana’s debt to GDP is 54% but the BOG reports that Ghana ended December 2018 with a debt to GDP of 58%. As a matter of fact, Ghana’s debt to GDP at the end of December 2018 based on the old series of Ghana was 71%. This is a very dangerous development given that this country under the NPP has not yet experienced any shocks to the economy.
  • Whilst the NDC has been at the forefront of fighting Government for the exorbitant duties and charges they have imposed on importers in the last two years, Dr Bawumia’s explanation of how Government intends to improve revenue to cater for the short fall the announcement of the deceptive import duty reduction is bizarre and shows the lack of understanding of how marine cargo traffic can be attracted. By comparing volumes generated by Togo Port to Ghana’s Port is akin to comparing Baboons with Goats. Togo is a free Port and so not amount of reduction without fully abolishing all charges non-existent in Togo will make Ghana a destination of choice above Togo.
  • The international investor community and indeed the IMF and the World Bank must be worried about the start of fiscal expansion anticipated by the Government just a day after exiting IMF.

Rising Fiscal Risks and Rigidities

  • In recent times, Ghana’s fiscal regime has been characterised by ‘crude and repulsive fiscal consolidation’ that is largely driven by non-performing revenue and the resultant cuts in critical spending. These developments are quite worrying. Worrying because by continuously cutting spending to match the historic lag in revenues, the Akufo-Addo and Bawumia government are delaying the forward march of our dear country through artificial and unsustainable fiscal outcomes. This fiscal stance of the government, which is inspired by its Economic Management Team’s affixation with theory and book-based economics (you recall Dr Bawumia and his academic lectures?) rather than pragmatic and time-tested policies has brought with it weighty risks and rigidities in fiscal operations.
  • Ladies and Gentlemen, globally,fiscal strategy formulations, approvals and implementations aim to produce a combined effect of finding innovative ways to generate enough domestic resources to fund government programmes and budgets. The ultimate objective in this is always to deliver development and uplift the well-being of the people in a sustainable manner that ensures reduced debt accumulation and sustainability of financing arrangements. A good fiscal strategy must, therefore, achieve the following objects;
  • Efficient and effective mobilisation of tax and non-tax revenue to finance critical expenditures.
  • Efficient and effect expenditure controls and management.
  • Align fiscal arrangements to the short and medium to long term needs of revenue deployment and flexibility needed for fiscal space, going forward.
  • Manageable levels of deficits and financing arrangements to ensure debt sustainability.
  • Investments in critical growth enhancing expenditures such as infrastructure.
  • It is, therefore, incumbent on every government to seek to drive revenue growth to fund its programmes. Any fiscal strategy that consistently delivers low revenues and resorts to excessive expenditure cuts creates traffic jam for growth drivers in the real sectors. Unfortunately, the current Economic Management Team of our dear country, led by my own elder brother, who, I understand, is now affectionately called ‘Walewale Adam Smith,’ does not understand. This is well articulated in the fiscal regime that the Akufo-Addo and Bawumia government have operated since 2017.
  • A cursory view of it shows a dangerous divergence between revenue performance, expenditure levels and the crowding out of short-to-medium term fiscal space. The table below show the deteriorating fiscal developments of our country over the past two years:

Item                                                                          2017          2018             2019*

Compensation of employees (GH)     16.8               19.6               22.8  

 Interest pa40%yments                                     13.6               15.8               18.6

Sub-Total                                                                 30.4               35.4               41.4

Tax Revenue                                                         32.2               37.8               45.3

Percentage of Tax Revenue                94.41%        94%               91.4%

Statutory & other earmarked Funds    12.8                     14.5                 18.2

Sub-Total                                                                 45                   52.3               59.6

Total Revenue & Grants                         41.5               47.0               58.9

Percentage                                                  108%           111%          101%

Balance to be borrowed to fund                   3.5                   5.3                 0.7

Goods and Services                                             2.5                5.13               6.3

Borrowing for consumption                6.0                 10.43            7.00  

Capital Expenditure                                          6.3                   4.70               8.50  

Goods & Services to Capital                40%               109%            74%

Total Deficit Financing                            12.3               15.13            15.5

Table 4:

The data shows very precarious fiscal developments.

  1. The Walewale Adam Smith gave us a new definition of efficient expenditure management. He said ‘ The efficiency in expenditure management has come from the prioritizing and re-allocation of spending to areas most needed’.
  2. Clearly, the focus has been to prioritise consumption expenditure over spending on critically needed capital expenditure. That is why we are borrowing not to build schools, hospitals, provide portable water and build our roads but rather to pay salaries and goods and services. This is the new prioritisation and efficient public spending.
  3. In 2016, H.E John Dramani Mahama spent Ghc3.2 billion on goods and services to deliver about GHC7.7 billion of capital projects. The rate of goods and services to capital expenditure is a measure of efficiency in delivery capital projects and therefore a measure of efficiency in expenditure management. This means that H.E John Dramani Mahama delivered capital projects at a goods and services rate of about 40%. In 2018, Dr Bawumia delivered capital pr
  4. ojects and a goods and services rate of 109% but he says that is efficient expenditure management. Dr Bawumia, where did you learn this efficient expenditure management from?
  5. The following highlights from the above make for a very difficult fiscal environment for our country:
  6. Between 2017 and 2018, about 94% of tax revenue went into servicing just two budget items: compensation of public sector workers and payment of interests on public debts.
  7.  Curiously, compensation to public sector workers has ballooned from GH¢14 billion in 2016 to a projected GH¢22.8 billion in 2019. In nominal terms, a whopping GH¢8.8 billion has been added to the public wage bill. This represents a 63% increase in three years. It means that public sector compensation has been growing at an average of 21% a year. The forceful question from this revelation is ‘Has productivity in the public sector increased by 21% every year over the last three years?’ The answer is an obvious no and the reason for that is simple; since taking office in 2017, the NPP and its cronies have resorted to stuffing the public service with their families, friends and foot soldiers. At the Ministry of Finance and its agencies for instance, former employees of Databank and other persons related to the minister have taken over the roles of expert public servants. The worst thing about this is that rather than being on the public sector pay structure, these family and friends, cronies and foot soldier employees are often elevated, treated as special staff and given juicy salaries and perks. What the government does not know is this reckless addition to the public service is crowding out about $1.833 billion of fiscal space that could go into funding infrastructure. At this rate, Ghana’s public sector wage bill could double from its 2016 figure by 2020.
  8. The interest payments on the astronomical borrowing of this Government has added some GH¢8 billion to our interest costs despite the deception that they were profiling public debt to reduce interest costs. This equates to $1.7 billion. We shall return to debt shortly to show how our public debt is now in excess of GH¢200 billion.
  9.  Total government revenues, including grants are not enough to fund three budget items: compensation of public workers, interest payments for rising public debts and statutory and earmarked funds. To meet the excess demand, the government has been borrowing to fund these three critical items, a development that properly articulates the corner that the Akufo-Addo and Bawumia government’s own academic and naïve policy choices and actions have boxed the country into. As a result, between 2017 to 2018, the government borrowed GH¢8.8 billion to pay workers and interest on loans. This borrowing to fund these two-line items is now projected to rise to GH¢9.5 billion this year 2019.
  10. The government has borrowed GH¢7.63 billion from 2017 to 2018 to pay for goods and services. It projects to borrow a total of GH¢13.93 billion to pay for same by the end of 2019. That is a staggering $3 billion.
  11. From 2017 to 2018, a staggering GH¢16.43 billion has been borrowed to pay for consumption expenditure made up of workers’ salaries, interest payment and goods and services. By the end of 2019, government would have borrowed an unholy amount of GH¢23.43 billion to pay for consumption expenditure. That is, we would have borrowed about $5 billion to pay workers, interest on loans and goods and services.
  12.  Government has consistently reduced capital expenditure from 2017 to 2018, thereby reversing the gains made by the NDC to significantly address the huge infrastructural deficit of our country. In 2016, capital expenditure stood at GH¢7.5 billion, representing 4.5% of GDP. By 2018, this figure had been reduced significantly to a nominal of GH¢4.7 billion, representing 1.8% of GDP. In actual fact, we are experiencing negative investment in infrastructure in real terms from the 2016 levels.
  13.  This is the fiscal situation of our dear country presently. It is the situation that this government, whose Vice President and Head of the Economic Management Team, is no other person than Dr Bawumia, the all-knowing economist, who, before 2017, had bottled a section of Ghanaians into believing that he was the Economic Messiah. Strangely though, he has suddenly become a digital enthusiast, now racing from the AWAM Ghana Post GPS deal to the dubious mobile money interoperability contract that is costing you and I more than is necessary.
  14. Quite frankly, the IMF is exiting at a very trying time for Ghana’s fiscal regime. We are not just living from hand to mouth but also borrowing excessively to pay for consumption expenditure. Sadly, Akufo-Addo and Bawumia are not just stifling the potential of the economy through their wrong policy choices, they are saddling future governments with unsustainable debts that will create no opportunities for repayment streams of income. The alarming reality is that Ghana is heading towards a fiscal crisis that now require urgent attention to reverse. Yet, Akufo-Addo says he is “running a responsible administration, mindful of the next generation, and not the next election.”
  15. Well, that is laughable, insensitive and smacks of a king who is starved of the reality on the ground. Beyond the rhetoric in that rehashed statement, which is akin to the sloganeering antics of the NPP that the UN’s Special Rapporteur on Extreme Poverty properly captured in April 2018, it confirms growing perception that our president does not understand the basics of economic management and by extension, how that shallowness is hurting the lives of you and me. If he did, would he not have known that nobody presides over a team that borrows a whopping GH¢16.43 billion in two years to spend on consumption expenditure yet turns around to claim that that administration is interested in the future of the country?
  16. Would he not have known that viciously collapsing nine banks established by our own brothers and sisters and in the process, depriving over 4,000 fellow Ghanaians of their sources of livelihood and on top of that taxing us to pay almost GH¢40 billion over 10 years for that repulsive action is a new record of recklessness? At least, he would have known that consistently cutting spending on capital expenditure stifles growth, the very thing needed to create prosperity for the future. But he doesn’t, he won’t and he isn’t cut for it.


                                                                                                                  Us$ BILLION

  1. Compensation of public workers                                         1.833
  2. Interest Payments                                                                       1.700           
  3. Goods and Services                                                                     2.902

Total                                                                                                        6.435

Table 5

This is an incredible waste of borrowed funds.


  • Mr Chairman, as if the above was not scary enough, the government continuous to create mounting fiscal pressures that impose significant encumbrances, inflexibility and non-discretionary bottlenecks in the management of the economy. These range from fiscal rigidities to securitisation of future revenue flows that impact debt management by creating layers of seniorisation of public debts. This means that while government would have no discretion in the use of those flows, the economy would be significantly exposed to vulnerability and debt service difficulties if future flows are hit by economic circumstances. This is tantamount to suffocating the economy.
  • The following are some of the incredible appetite for borrowing and mortgaging of future revenues;
  • Mortgaging mineral royalties from mining operations for the next 30 years to borrow $750 million. This means that for the next 30 years, successive Governments would not be able to leverage these royalties for development. Instead, they would be saddled with huge debt overhang should prices of gold and other minerals such as bauxite and diamond slump on the world market or we experience low output from the mines.
  • Mortgaging bauxite yet to be mined for the next 10 years to borrow $2 billion on deferred payment terms from Synohydro. This encumbers critical future flows that could give flexibility in the management of fiscal space. It is important to note that the Synohydro deal imposes a contingent liability on the state and will crystallise as a public debt immediately Synohydro delivers the underlying projects.

At this stage, let me clear a misconception around this dubious transaction. The reason why the Synohydro deal is not currently treated as part of our public debt is not because it is leveraged on bauxite. It is because there is currently nothing to owe Synohydro for. The deferred payment will kick in when the projects are delivered and government will then owe Synohydro for the projects to be paid for in future. At that point any unpaid portions of the deal will be a public debt, thereby limiting government’s ability to finance critical projects, going forward.

  1.  Mortgaging 30% of GETFUND proceeds for the next 10 years to borrow $1.5 billion. This will come at additional annual interest payments to further squeeze fiscal space. This is despite loans coming in every now and then to Parliament for approval to finance education infrastructure.
  2. Consignment of ESLA proceeds to ESLA PLC to finance energy sector bonds of about $1 billion initially for a period of 10 years.
  3. The issuance of bonds of about GH¢12 billion for the collapse of nine banks and a further GH¢6 billion projected for 2019 to bring the total cost of the financial sector collapse to GH¢18 billion. That is, the taxpayer, you and I, is carrying a cost of $3.75 billion in addition to an annual interest payment of about GH¢1.8 billion a year for the next 10 years. This translates into interest payment of $375 million per year and increasing to $3.75 billion in 10 years in interest payments. In all, the Ghanaian taxpayer will pay $7.5 billion in interest costs and principal over a 10-year period for the vicious collapse of nine indigenous banks. Yet, President Akufo-Addo says his government is being fiscally discipline. Someone should please prick the president and ask him to define fiscal discipline.
  • Ladies and Gentlemen, these encumbrances and reckless borrowing spree will significantly increase fiscal rigidities, elevate the risks and expose the country to headwinds. The interest payments associated with these financial instruments will worsen the challenges of crowding out fiscal space from interest payments, which is currently budgeted at some staggering $3.875 billion for 2019. Instructively, this government has added $1.625 billion to interest payments in just three years from the 2016 figure of $2.25 billion. With a wage bill that has been increasing at a rate of 21% per year in the last three years and revenue stagnant at 15.6% of GDP in the last two years, Ghana is on a dangerous fiscal time bomb. 
  • The ECF Programme with the IMF aimed to achieve a resilient fiscal regime that allows for increased revenue mobilisation and eliminate unsustainable fiscal rigidities to create fiscal space. This space was badly needed to accelerate the pace of infrastructural development and improved social spending for efficient and effective service delivery. Unfortunately, the reverse has happened over the two years. The managers of the economy have rather plunged the economy into a fiscal manhole that is deeper and crocked than the verbal dams being dug across all villages in the country.
  • In addressing this concern, the IMF Executive Board made the following startling observation;

‘Noting the low tax ratio, they (the IMF Executive Board) underlined that stronger revenue mobilisation will be critical and welcomed the submission of the tax exemption bill, which needs to be complemented with enhanced tax compliance efforts. They underscored the need to create fiscal space to support priority programme.’

  • Clearly, the IMF is worried about the low revenue generation during the ECF programme. But what lies ahead is even scarier for if the government failed to raise revenue under a funded programme with all the pressure, Now that they have no pressure and are keen to engage in populism as was witnessed, I guess is as good as mine.
  • The challenges of creating fiscal space given the fact that Government’s consumption expenditure is spiralling out of control pose a real fiscal nightmare. This is worsened by the creation of multiple layers of fiscal inflexibility and has been a major concern to the IMF and the increasing resort to unnecessary vehicles for collateralisation. To this end, the IMF sounded an emphatic warning;

Directors urged the authorities to limit debt collateralisation and revenue monetisation to avoid encumbering revenues and creating seniority among creditors. They recommended caution with the planned financing scheme to build infrastructure projects and urged that these financing schemes be transparent, consistent with debt sustainability and ensure value for money’.

  • Mr Chairman, these are not love messages. These are strong concerns over the several areas of the financial and fiscal governance of our country. They are worried over the trend of collateralisation of future revenues and the expensive, non-transparent and debt amazing schemes of the government.

Deteriorating Economic and Operating Environment

  • Ghana’s fiscal quagmire has been recognised internationally as businesses and the general private sector reel under severe economic and deteriorating business environment. As the government grapples with how to find space in the budget to fund infrastructure and accelerate badly needed institutional and structural reforms beyond those started by the NDC administration, the investment and business climate has deteriorated.
  • Sadly, the international community is recognising it. The 2019 edition of Rand Merchant Bank’s (RMB) annual report dubbed Where to Invest in Africa shows a Ghana in need of urgent help. Our country, which ranked 5th in 2018, slipped four places to now be ranked 9th after two years of deteriorating investments in critical infrastructure and worsening corruption. It will interest you to note that Ghana was ranked 5th in 2017, worse than the 4th position that we occupied in 2015 and 2016. In 2014, Ghana was actually ranked 3rd on that same enviable ranking. In effect, the worst perceptions of the global community about an economy managed by the NDC is still better than the best perceptions of those same investors in an economy managed by the NPP. This is neither Isaac Adongo nor General Mosquito or John Mahama speaking. It is data and facts speaking, the very data Dr Bawumia saw but ignored for obvious reasons.
  • Ladies and Gentlemen, so, while Ghana has remained a country governed by PR in a circus and by persons exhibiting blood lines of the famous P. T. Barnum, a celebrated publicist of 18th century fame, and without appropriate renewal and improvements in its economic and operating environment, our neighbours are busily working, talking less but overtaking us convincingly. No wonder containerised cargo through our ports grew by a sluggish four per cent in 2018
  • Sorry State Of Capital Spending Under NPP and Borrowing Eurobonds for Consumption

Actual/Outturn for CAPEX

Item 201632. (Ghc million) 2017 (Ghc million) 2018 (Ghc million) 2019 (Ghc million)
CAPEX 7,678 6,331 4,738 8,531
Domestic Financed 2,049 1,621 1,683 3,222
Foreign Financed 5,630 5,310 3,055 5,308

Table 6

  • Ladies and Gentlemen, the situation even gets scary as one studies the data further.A review of the fiscal tables of the 2019 Budget shows a very alarming trend of borrowing expensive Eurobond not for capital expenditure but for consumption. The table above shows that the total budget for domestically-financed capital expenditure projected for 2019 is v GH¢3.22 billion. Out of this amount, about GH¢1.27 billion will be financed through oil proceeds accruing to the ABFA. This means that the domestically-financed capital expenditure budget to be financed through Eurobond and domestic bonds will amount to a paltry GH¢1.95 billion. That is about US$390 million. This is outrageous. It means that some US$1.61 billion of the US$2 billion Eurobond proceeds, representing 80.5%, will not be spent on infrastructure but on consumption. It means that like Ken Ofori-Atta led a kenkey consumption party to celebrate the borrowing of the US$3 billion, a chunk of the Eurobond be spent on stomach-directed expenditures. This is not only a pity, it makes our country a laughing stock in the eyes of the investors who gave us the money. For they will be asking ‘which serious country celebrates for taking a loan; a loan that they will not invest in productive ventures but on consumption expenditures?
Year Eurobond (US$) Spent on Capital (US$) Spent on Consumption (US$)
2018- Actual 750 million 119 million 631 million
2019- Projected 2 billion 390 million 1.61 billion
TOTAL 2.75 billion $509 million 2.241 billion

Table 7

  • In two years, we have borrowed US$2.75 billion (GH¢13.75 billion) of Eurobonds on the international capital market and spent only $509 million (GH¢2.55 billion) in capital expenditure. Ironically, about US$2.241 billion (GH¢11.21 billion) has been dissipated on consumption expenditure yet our children will have to repay these loans. Someone please ask Dr Bawumia, the Adam Smith from Walewale, if this is the type of economic management that he learnt at University of Buckingham in the UK.


  • Our Chairperson, let’s shift attention to the banking sector, where the NPP, led by Ken Ofori-Atta’s crude, vicious and personal appetite for wealth accumulation, have combined with the party’s infantile policies to place the sector in a crunch never seen before. The Nana Akufo-Addo/Bawumia administration has not only hidden under the IMF Programme to collapse nine banks and deprive over 4,000 Ghanaians – our brothers and sisters – of their jobs, they have placed the banking sector in shackles. How have they done this? 
  • Since assuming office in 2017, the NPP through the Ministry of Finance and the Bank of Ghana have embarked on what they termed a banking sector clean-up or reform exercise in an acrimonious posturing aimed at fighting shareholders and directors. This has ranged from enforcing a new minimum capital requirement to resolving and consolidating banks as well as developing schemes to leverage debt instruments to recapitalise selected banks.
  • On January 4 this year, when the Governor of the Bank of Ghana gave an update on the reforms, Dr Ernest Addison, who is the brother of President Akufo-Addo’s lawyer, Philip Addison, touted the exercise as successful. He went on to claim that the exercise had repositioned the banking sector as better capitalised, more resilient, liquid and stronger. I have also seen and heard government and Bank of Ghana officials hurriedly multiple the number of banks in the system by the GH¢400 million minimum capital to buttress their point that the sector was now liquid and well capitalised. Just yesterday, Dr Bawumia said the exercise brought in excess GH¢4 billion. For the avoidance of doubt, that was a shameful lie, one that exemplifies that shallowness of our Vice President in matters of this nature. This is because the recapitalisation exercise brought in less than GH¢2.3 billion in fresh capital.
  • Ladies and gentlemen, toproperly assess the impact of the recapitalisation exercise on the banking sector, one needs to ask how we got to the point where recapitalisation was a necessity.

Genesis of Banking Sector Reforms

  • Conscious of the need to strengthen the banking sector, the previous managers of the Bank of Ghana contracted KPMG and PwC to conduct an asset quality review (AQR) of banks in Ghana in 2015 and an updated one in 2016. The review at the time showed that banks were at various solvency levels, with eight of them having clear capital shortage problems. For some of these banks, the shortages resulted from deterioration of their loan portfolios to small and medium enterprises (SMEs) while for others, it was due to exposures to state-owned enterprises (SOEs) in the energy sector as well as Bulk Oil Distribution Companies (BDCs).
  • The asset review, which was part of the IMF Programme had given a clear insight into the state of the banking industry at the time and led to the initiation of a number of legal and institutional reforms to address the vulnerabilities. In particular, please recall the passage of the Energy Sector Levies Act (ESLA) in December 2015. The Act was to provide funds to pay for loans and exposures of the banks to the energy sector SOEs such as VRA, ECG, GRIDCo and BDCs. This was expected to help clean up the balance sheets of these SOEs and improve the liquidity, solvency, non-performing loan portfolio and capital adequacy of the banks.
  • The updated review in late 2016 also informed the establishment of a recapitalisation and liquidity roadmap for the banking sector. This roadmap was to be completed by end-2019 and included the following strategies:
  • Introduction of a new minimum capital requirement of GH¢230 million for banks. It was to take effect on 2017 and end by December 2019.
  • Implementation of a two-fold fiscal policy strategy to significantly restore the impaired loan portfolio of banks resulting from their exposure to government and government-related exposures to their clients. In this respect, these arrangements were agreed;
  • Introduction of ESLA with a sunset close of three years to generate resources to pay all legacy debts owed by the energy sector SOEs and BDCs to the banking sector. This was to repair their loan portfolio and clean-up the balance sheets of these SOEs and the affected banks. It was also to provide regular streams of funds to the banks, improve their NPLs and reverse losses on their income surplus to contribute significantly to meeting the new minimum capital and improve liquidity.
  • Issue government bonds that could be listed on the Ghana Stock Exchange to pay government debts to contractors and service providers who would then be able to pay their loans to their banks. This was to further improve the balance sheets and liquidity of these banks and contribute significantly towards them meeting their minimum capital requirements.

It was estimated that these two strategies would have injected a total of about GH¢8 billion into the banking sector to help the banks with their own monies to meet the minimum capital requirement, improve solvency and liquidity of local banks and save thousands of SMEs from collapse. Generally, the banking sector would have been very liquid to extend more credit to the private sector.

  1. Internal Capital Adequacy Assessment Process (ICAAP)

The third strategy on the roadmap to strengthening capital adequacy was to identify the differences in the levels of risks carried by each bank in relation to its capital and then agree to a roadmap for each bank to address any additional capital requirements. This means that the proposed minimum capital requirement of GH¢230 million was the base from which individual banks may have to top up the level of capital consistent with levels of risks they carry. To this end, the BOG issued a guideline on the implementation of ICAAP to the banks. The ICAAP was to assess a bank’s risks, detail how the bank intended to mitigate those risks and how much current and future capital would be necessary, having considered other mitigating factors. Clearly, this would have introduced the needed flexibility to have small local banks operating alongside the big banks without compromising on solvency or compelling small local banks to carry a lot of capital far beyond their needs.

  1. Legal Reforms and Institutional Strengthening

A critical challenge that was identified by the managers at BOG during the previous administration were significant weaknesses in the legislative framework for ensuring financial stability and sound banking sector operations. In view of this, it was very important to address these weaknesses to anchor sustainability of the measures introduced to create a sound, robust and solvent banking sector. The BOG then undertook a raft of legislative reforms and institutional strengthening to anchor the process. These included the passage;

  • The Bank of Ghana Amendment Act, 2016 (Act 918):

Amendments to the Bank of Ghana Act sought to clarify some ambiguities in the Act and make the role of the Central Bank more transparent. It must particularly be noted that it was the passage of Act 930 that provided the Bank of Ghana the necessary powers to resolve insolvent banks as is being done now. The Act was also meant to ensure that a credible threat of resolution would serve as incentive for banks to implement recapitalisation. 

  • The Banks and Specialised Deposit-Taking Institutions, 2016 (Act 930): This was to bridge gaps associated with consolidated supervision, bank resolution and other lapses identified in the legal framework that was left by the previous NPP government
  • The Ghana Deposit Protection Act, 2016 (Act 931), which sought to provide a safety net for customers of financial institutions.
  • The Public Financial Management Act (PFMA): This Act, which included the Treasury Single Account concept, was meant to centralise government funds to allow for proper utilisation and reduce the situation where commercial banks were lending back the state’s own resources to it through the purchase of Treasury bills and bonds. But conscious of the impact of a one-off migration on banks, the government proposed a structured format to allow banks to use months to move the funds from their accounts to a centralised account at the central bank.

Current Reforms

  • it is clear that the NDC administration, led by the affable JM, had a clear, cost-effective, people and business-centered, and superior roadmap in place to create a robust, sound, solid and a properly capitalised banking sector. This was to be done seamlessly and without the acrimony, vendetta, preying on people’s toils and collapse of the banking and financial sector that we are seeing today.
  • Unfortunately, on December 7, 2016, Ghanaians said they wanted to experiment with Akufo-Addo and Bawumia. This truncated the NDC’s plans to revamp the banking sector. To help carry out their vicious plans, the NPP first cleared the board and top hierarchy of the Bank of Ghana in clear contravention of the law and replaced them with their cronies, families and friends. This ushered in the current reforms, which have been focussed largely on the minimum capital requirements. The minimum capital announcements were undertaken with coordinated activities with the Securities and Exchange Commission (SEC) to ensure that local banks were unable to meet the directive so they could be resolved and consolidated at outrageous costs to the Ghanaian taxpayer. The following are the features;
  • Unrealistic Minimum Capital Requirement

The BOG announced a steep increase in minimum capital from GH¢120 million to GH¢400 million ordered banks to meet the directive in 16 months compared to an earlier plan of GH¢230 million within 36 months. It is instructive to note that the jump in capital from GH¢120m to GH¢400 with a duration of 16 months is the highest amount and shortest period in the history of bank recapitalisation in Ghana.

  • Increased write-offs of NPL to further deteriorate capital of banks, especially local banks. Government refused to pay its debts owed to the banks while the BOG compelled the banks to write-off bad debts, including those owned to the state. These banks have, therefore, chuck of the monies they lent to contractors to provide services to Government contrary to the NDC administration’s plans to issue listed government bonds to banks to pay government debts to clients of these banks owed by the government. As a result of this repulsive policy, the following banks suffered:
  • Unibank was owed GH¢1billion by government and its clients who worked for government yet government refused to pay leading to its collapse.
  • Government owed GN Bank Limited, now savings and loans and its sister company, Gold Coast Securities over GH¢2 billion. However, government, through Bawumia and Ken Ofori-Atta, refused to pay, leading to challenges at the bank. Instructively, these figures were authenticated by auditors hired by the Ministry of Finance to audit GN Bank’s exposure claim to government. So, to all the customers of GN Savings and Loans and Gold Coast Securities; you are not able to withdraw your investments because Bawumia and Ofori-Atta have refused to pay these institutions what is due them.
  • All banks boxed together without regard to hand-holding local and new banks. Irrespective of the size and level of risks a bank carried, all the banks were treated the same way. Madam Chair, it will interest you to note that this generalisation led to Bank of Baroda Ghana, which was owned by the Indian government, winding up its operations and packing out of Ghana. The bank had earlier explained to Bank of Ghana that their mode of operations did not require huge capital. But fixated with the steep increase in the minimum capital, our central bank stood its grounds, leading to us losing the only Indian bank in the country. Of course, this action does not augur well for relations between Ghana and India.
  • Political Vindictiveness the Name of Reform
  • Heritage Bank:

Of the nine banks that collapsed under Dr Addison and Mr Ofori-Atta’s Draconian reforms, only Heritage Bank was a solvent bank. By solvent bank, it means that the bank was not a threat to third parties. Yet, BOG came up with very strange and flimsy reasons to take the bank and consolidate it into CBG. These are some of the weird reasons;

  • Fit and proper.

Dr Addison claimed that because the majority shareholder is in court over dispute in relation to a business transaction, he’s not fit and proper. This is laughable. So, because when it comes to the issue of who is fit and proper to operate in Ghana’s financial sector, the institutions that fail that test are the Bank of Ghana and the Ministry of Finance and they are each headed by persons who pride in trampling upon rules. As you already know, some four private investors lost their investments in ADB Bank under a share annulment exercise that reverted 51 percent of ADB Bank to the Financial Investment Trust (FIT). The Trust is a subsidiary of the Bank of Ghana. As a result of that action, the Bank of Ghana now owns 60.5 percent of ADB. Yet, this same bank operates with an illegal board. It is on record that the ADB Board, chaired by one Mr Alex Benarsko, who is a former director of UT Bank, has not been approved by the Bank of Ghana. The board, however, was inaugurated on the authority of Ken Ofori-Atta, although the Bank of Ghana had not approved it. Now, tell me; is it Heritage Bank’s significant shareholder and philanthropist, Seidu Agongo, or Bank of Ghana that is not fit and proper to operate a bank?

Section 58 of Act 930) and Fit and Proper regulations of BOG states categorically  that ‘A person shall not be appointed or elected or, accept an appointment or election , as a director or key management personnel of a bank, specialised deposit taking-institution or financial holding company if that person (d)  has been a director, key management personnel or associated with the management of an institution which is being or has been wound up by a court of competent jurisdiction on account of bankruptcy or an offence committed under an enactment’.”

  • The resolution of UT Bank and Capital Banks were in response to reported breaches of an enactment, which enactment was referred to as Act 930 by BOG. Base on this, three persons, who are not fit and proper, according to Bank of Ghana’s own rules, sit on the board of ADB Bank, a bank that is 60 percent owned by the Central Bank. ADB’s current board chair, Mr Alex Benarsko, was a director of UT Bank prior to its collapse in 2017 while the current MD, Dr John Kofi Mensah was also a former MD of Capital Bank. Also, a former Secretary to the board of UT Bank, Madam Mary Abla Kessie, is now a director of ADB Bank. In fact, as we speak, the Receivers of Capital Bank have sued ADB’s MD to pay back GH¢15.7 million that he is believed to have misappropriated to himself while serving as MD of the collapsed bank.  These explain why the Central Bank has not approved ADB Bank’s board yet Ken Ofori-Atta went ahead to cause its inauguration. But because the BOG Governor, Dr Ernest Addison, is an appendage of Ofori-Atta, he has failed to take action, leaving in the system a bank whose board is operating illegally.

Ladies and Gentlemen, now tell me; between Seidu Agongo and Bank of Ghana, who is fit and proper to own and operate a bank in Ghana’s financial sector?

  • Over Exposure of Heritage Bank to Seidu Agongo

Another funny reason used to take down Heritage Bank in August 2018 was the overexposure of Seidu Agongo to Heritage Bank. Ironically, it is this same Bank of Ghana that had given Heritage Bank three years, beginning from 2016, to dilute the shareholding of Mr Seidu Agongo down from 70 percent. And when this was being done, the Bank of Ghana ignored its own advice and took down the bank. What Ghanaians do not know is that two other banks are in situations that are worse that Heritage Bank’s yet the Bank of Ghana found it prudent to save them and bring them under the dubious and shady GAT support.

  1. The first is the Universal Merchant Bank (UMB). UMB is 96 percent owned by one shareholder, Fortiz Private Equity Fund. Yet, Bank of Ghana did not see this as overexposure that should have cost the bank its licence.
  2.  Also, Mr Joseph Siaw-Agyapong, who the NPP vilified as the most corrupt entrepreneur while in opposition yet he is now the darling boy of President Akufo-Addo, owned 99 percent of Omni Bank, which has now merged with Sahel Sahara Bank. I have heard you ask who owns the remaining one percent. That is a genuine question and I have the answer for you: Mrs Cynthia Araba Agyepong, wife of Mr Agyepong of Zoomlion fame, owned the remaining one per cent of Omni Bank.

So, ladies and gentlemen, when I say that the Bank of Ghana has abandoned its sacred responsibility of transparency, fairness and justice in the application of rules and regulations and has now taken the path of victimisation, arbitrariness and corporate capture all in support of Ken Ofori-Atta and the NPP’s agenda, I do not say it in vacuum.

Then and Now

  •  Mr Chairman,, so what became of our banking sector after the reforms? In other words, how has the NPP, under the IMF Programme managed the banking sector compared to the NDC? The data below exposes the ignorance and dowses the propaganda that the Bank of Ghana Governor has distastefully joined the government to spew.
  • To enable us assess the impact of the NPP’s policies on our banking sector, one needs to look at how the reforms impacted growth metrics in the banking sector. The data and chart above confirm that the banking sector has been worse off in 2018, when the reforms ended compared to 2016, when the NDC left office. Annual growth in industry assets, total advances, deposits and private sector credit (PSC) all deteriorated in 2018, contrary to the deception by Dr Addison and government officials that the sector has seen marked improvement under the NDC. Quite shocking is the trend in non-performing loans (NPLs). The data shows that it deteriorated from the 2016 close of 17.6% to 18.2% in December 2018.
  • Now, tell me, Ladies and Gentlemen, how can a sector, whose growth metrics are worse in 2018 compared to 2016 be described as better now? Clearly, the NPP are studying the data with a different methodology, a methodology that can only be taught them by their voodoo economist, the legendary Walewale Adam Smith. What they must note, however, is that Ghanaians have had enough of him and are now well aware of his theatrical machination of numbers to gain political capital. If for nothing at all, Ghanaians remember his infamous Mallam Atta inflation method, the one a senior high school economics student will not use to calculate national inflation but was used by a PhD holder to calculate Ghana’s consumer price inflation.

Impact of Recapitalisation on Capital Injection

  •  At this stage, let me deal with the propaganda around the impact of the recapitalisation on capital injection. In September 2017 when the Central Bank directed the banks to recapitalise from GH¢120 million to GH¢400 million, it gave the banks three options to use in meeting that directive. They could recapitalise through fresh capital injection, transfer from income surplus or use a combination of the two. Please note that it is only fresh capital injection that brings new and additional capital into the banking sector. Transfer from income surplus is only a book entry exercise that shifts existing funds from the income surplus account to stated capital.

Therefore, to know the amount of new capital that the exercise brought into the country, we need to know how the various banks recapitalised. The table below explains this

Capitalisation via Income Surplus

UBA 325
GCB 400
CAL 300
TOTAL 2,402

Capitalisation via Fresh Injection

ACCESS 221.8
CBG 450
FBN 345
GTBANK 322.3
FBN 202
TOTAL 2,284.7

 It is clear from the above that the recapitalisation exercise brought in only GH¢2.2 billion, less than US$450 million. The higher amount of GH¢2.4 billion were existing capitals that were only moved through book entry. If not for propaganda or ignorance, how then can one say that the recapitalisation brought with it billions of cedis into the banking sector? 

The Ghana Amalgamated Trust

  • A review of the banking sector in the light of the current state of the economy cannot conclude without looking at the scam GAT arrangement. After creating a troubling environment for banks that made it difficult for them to raise capital from investors in and outside Ghana, the government and the Bank of Ghana also ignored competent counsel from some of us on how to support indigenous banks to recapitalise. I am on record to have advised the Ministry of Finance and Bank of Ghana to use an equity financing model to support our local banks to meet the minimum capital. Later, in December 2018, the Chartered Institute of Bankers Ghana, to which the Governor of the Bank of Ghana is a member, also added its voice in that regard.
  • Typical of the current managers of the economy, especially of Dr Addison and Ken Ofori-Atta, they arrogantly ignored it at the time only to come back to it at the eleventh hour with a shabbily-structured special purpose vehicle (SPV) named Ghana Amalgamated Trust. What Ghanaians do not know is that that SPV is the beginning of a bank to be named Ghana Amalgamated Bank. Sadly, that bank will not be owned by the government or pension contributors whose funds are being targeted for use to fund this transaction.
  • In January this year, the Governor of the Bank of Ghana announced that private pension funds have come together in a private arrangement to help these banks recapitalise after they failed to do so by the close of 31st December, 2018 being the deadline for recapitalisation. At the time, we were told by both BOG and government that this would occasion no costs to the state and the bank would be recapitalised by March 2019. What we now know is that these are naked lies that were fabricated to deceive Ghanaians. GAT is not only a cost to the state, as seen by the sovereign guarantee that Parliament recently approved, it has failed to recapitalise the five banks as at the end of March.
  •  I am aware that almost all pension funds are running aware from the GAT arrangement and that makes it nearly impossible for the SPV to raise the needed funds. This explains why although Bank of Ghana gave the Trust a deadline of March 31 to recapitalise the five banks, not even one pesewa has been raised as at today and the managers of GAT have no idea when they will go to the market to raise the funds. This means that UMB, NIB, ADB, Prudential Bank and Omnic-BSIC Bank are still operating without the required capitals in clear contravention of the BSDI Act, Act 930. 

62,      Also, I have said elsewhere that the GAT scheme is a clandestine move to takeover ADB and NIB and I do not intend to bore you with more information. However, permit me to make some startling revelations on NIB.

  • As you may be aware, Ken Ofori-Atta has successfully elbowed Togbe Afede and Dr Kweku Asamoah, who were the Board Chairman and MD respectively off NIB. This was part of the grand scheme started in 2017 and meant to grant total control of the bank to the Finance Minister and his cronies to do with NIB what they are doing with ADB Bank.  The NPP, through Ofori-Atta programmed NIB for failure after trying without success to extend the illegalities committed at ADB to NIB. In fact, all well-meaning Ghanaians must doff our hats to the Agbogbomefia of the Asogli State, Togbe Afede and Kweku Asamoah for standing their grounds and delaying the onslaught on NIB. The two endured the NPP’s vicious and concocted stories about the board and management. When this was not working, the Finance Ministry sponsored state-owned enterprises (SOEs) to run on NIB, ostensibly to weaken it and make their stories about the board and management credible. I can confirm that state-owned enterprises (SOEs) withdrew a total of GH¢1.8 billion from NIB in the first 11 months of 2018. This is just from SOEs. Added to withdrawals from private entities resulting from the uncertainties and negative stories about the bank, NIB lost a total of GH¢2.36 billion in deposits between January and November last year.
  • Ladies and Gentlemen, now tell me which bank will endure this state-sponsored run and still be on its feet? Yet NIB survived and indeed, did not require GAT support to be able to exist after December 2018 contrary to what we were made to believe. By December 2018, the bank had cash and cash equivalents in excess of GH¢1 billion.

Cost of Financial Sector Clean Up

  • When one examines the real cost of the financial sector clean up to the country, it begs the question if the NPP government really has the nation at heart. Not long ago, around 2017, the government told us that the country was broke and funds to implement critical growth enhancing initiatives such as its sloganeering programmes, 1D1F, One village, one dam and one constituency, USD1 million.
  • Interestingly, however, it has found billions of cedis to collapse the banking sector under an exercise that is costing people their daily bread, sources of livelihoods, lifetime businesses, and generally marginalising growth in the financial services sector and the private sector in general.
  • While the Bank of Ghana and the Ministry of Finance have variously thrown out figures on the cost of the so-called clean up, those figures have failed to capture the full impact of the exercise to the public purse.
  • To properly appreciate the full cost of the exercise, one needs to understand that the state has to pay interest on the bonds issued to clean up the banking sector on annual basis from the time of issue to time of maturity. Thus, the total cost of the so-called clean-up is the face value of the bonds issued, which is the principal, plus the interest to be paid from date of issue to maturity.

Cost of banking sector clean up

Year Bank Principal (GH¢)  Rate (%) Tenure (YRS) Total interest to maturity (GH¢) Total fiscal cost (GH¢)
2018 GCB Bank 2.2 billion 10 10 2.2 billion 4.4 billion
  CBG 7.6 billion 10 10 7.6 billion 15.2 billion
  CBG 2.160 billion 8 10 1.728 million 3.456 billon
2019 CBG 1.4 billion 10 10 1.4 billion 2.8 billion
2019 MFI 960 million 10 10 960 million 1.920
2019 S&L/FH 6.140 billion     6.140 billion 12.280 billion
TOTAL   20.46 billion     20.028 billion 40.488 billion

Table 10

  • In the banking sector alone (as shown in the table above), a total of GH¢11.96 billion has been spent in 2018 for the collapse of nine banks. As if that is not enough, the government has budgeted to spend a further GH¢8.5 billion this year to collapse some savings and loans companies, micro finance institutions and finance houses. This brings the total costs by end of 2019 to GH¢20.46 billion. This will cost the Ghanaian taxpayer GH¢2.028 billion in interest every year and that should rise to GH¢20.028 billion in 10 years. In ten years’ time when we finished paying these bonds, we would have spent GH¢40.488 billion to collapse our own banks and other financial institutions in a self-seeking reform exercise. This is indeed crazy. My appeal, however, to them is to have mercy on the non-bank financial institutions that they are preparing to move to. If they do not care about the GH¢8.5 billion that they plan to expend on that vindictive exercise, they should care about the impact on jobs, livelihoods and the soundness of the exercise. Ghanaians have had enough of the collapse with the collapse of institutions under a so-called reform exercise.

External Vulnerability and the Cedi Depreciation

  • Ladies and Gentlemen, another critical objective of the IMF programme was to provide balance of payment support and technical backstopping for the country. These were to assist the Bank of Ghana build reserves and buffers to mitigate against the external vulnerabilities that the country suffered in the light of the collage of world commodity prices in 2015. This was critical to provide the shock absorbers through enhanced reserves to help the economy withstand headwinds and support the Cedi against major trading currencies.
  • In 2015, Ghana recorded a gross international reserves (GIR) of US$5 billion and a net international reserves (NIR) of US$3.1 billion. These levels were considered low in the light of the elevated vulnerabilities from the exogenous shocks. After four years under the IMF Programme, it is necessary that we evaluate what we have achieved in this light. This part of the lecture will, therefore, take us on a tour of the various levels of vulnerabilities to assess if we are now better placed to withstand headwinds and potential exogenous shocks to the economy. This will help us situate recent performance of our currency, the cedi and review short, medium to long term solutions to the challenges facing the cedi
  • Gross International Reserves
  • The gross international reserves measure the quantum and value of foreign currency in the country without regard to who owns the stock of currencies and any obligation placed on those stock of foreign currencies in the short term. A higher gross international reserves suggest that the country has enough foreign currencies to meet demand for foreign currencies by its citizens and other economic agents to transact business and meet their foreign currency denominated obligations with the rest of the world. Often, the strength of a country’s ability to provide these currency funds is measured by how many months of the country’s imports are covered by the gross reserves.  In 2015, at the height of the external shocks, Ghana’s gross reserves was valued at US$5 billion. This figure has increased to US$7 billion at the end of 2018, indicating that Ghana’s reserves have improved by about US$2 billion in three years.
  • Unfortunately, the GIR may include a large amount of foreign currencies that are not available to the Central Bank to intervene in the market to support the Cedi. For example, monies in the Sinking Fund account of government to pay for maturing debts and interest accrued will not be available to the Central Bank as this may result in costs default of government in meeting its maturing debt obligation. There are other encumbered funds sometimes constrained by legislation, which cannot be used by the Central Bank. An example is the Petroleum Holding Funds, which are controlled by the provisions of the Petroleum Revenue Management Act and cannot be available to the Central Bank to intervene in the market in the short term unless processes are initiated to comply with the law. Because of these, gross international reserves and its related months of cover for imports do not provide stronger stress test for a country’s levels of vulnerabilities. To address this problem, we resort to the net reserves.
  • Net International Reserves

73.     The net reserves solves the problem of encumbrances and other obligations imposed on the stock of foreign currencies in a country by accounting for the challenges associated with gross reserves. The net reserves is truly the level of foreign currencies controlled by the BOG, which can be freely used to support a currency without infringing on obligations and encumbrances imposed on foreign currencies. The net reserves can be used to measure various levels of vulnerability as follows;

  • The NIR as a cover for months of imports gives a better elevation of vulnerability. In 2015, Ghana’s net reserves stood at US$3.1 billion from a much smaller foreign currency economy measured by the gross reserves of US$5.88 billion. This means that about 54% of the stock of foreign currencies was directly available to the Bank of Ghana to support the Cedi and to serve as emergency foreign currency stock to withstand headwinds.
  • As indicated above, Ghana’s net reserves rose by US$2 billion from the 2016 levels to US$7 billion. Unfortunately, our net international reserves remained almost at the 2015 levels. As of December 2018, net reserves was reported at US$3.85 billion compared to US$3.1 billion in 2015. This means that although the economy now has a very high foreign currency component, the net reserves has not increased accordingly to provide appropriate cover for the demand that may result from this elevated vulnerability from a larger forex economy. As a matter of fact, only 45.7% of the stock of foreign currencies was directly available to the Bank of Ghana to support the cedi and to serve as emergency foreign currency stock to withstand headwinds. Compared to 2015, this is a deterioration of about 16.3% in the proportion of the stock of foreign currencies that is available to provide buffers for the high levels of foreign currency assets in the country. In effect, Ghana’s vulnerability has deteriorated and that now exposes the country to elevated levels of vulnerability This significantly weakens our capacity to withstand external shocks, similar to what happened to the country in 2015. Clearly, this government under the IMF programme has failed to build the necessary buffers to improve our preparedness for headwinds.

Below is a table showing measures of reserves;

Item 2015 2016 2017 2018
GIR 5,884.7 6,161.8 7,554.8 7,024.8
 Growth in GIR 4.7% 22% -7%
NIR 3,183.6 3,431.0 4,522.5 3,243.0
Percent of GIR 54% 56% 60% 47%
Incr/Dec 2% 4% -13%
Depn 15% 9.6% 4.9% 8.4%
  • The state of short-term net private capital flows in relation to the appropriate cover for investors from NIR is of great measure of vulnerability. When investors disinvest and exit a country’s bond market, the ability of the Central Bank to assure these investors that it has enough foreign currency to enable them repatriate their investments and interest earned in the appropriate foreign currency becomes even more critical. In the last couple of months, Ghana has experienced significant capital flight as investors in Ghana’s local bonds have found interest rates unattractive and are exiting the market. In a situation such as we find ourselves in the level of NIR as a cover for the short-term net private capital flows becomes the ultimate measure of vulnerability of the country. While short-term net private capital flows has been alarming, our NIR has rather been declining to create discomfort and fear among foreign investors. Very low levels of NIR in this situation is akin to a bank with very low levels of liquidity which may get customers to run on it. It is in this vain that Bank of Ghana’s current dangerous practice of injecting our low levels of NIR into the market could result in elevated levels of portfolio reversals as fears grip investors to come and take out their money before we run out of foreign currencies.
  • In the last three months and particularly in the last three weeks, the Bank of Ghana has injected some US$1 billion into the market, ostensibly to stabilise the cedi to allow for the political propaganda that we saw recently. This is unsustainable, senseless and reckless and reverses all the work we did in four years under the IMF to build buffers to support the cedi. Ghana runs the risk of foreign investors increasing and fast tracking their exit from government bond market. The conduct of the BOG has further elevated Ghana’s external vulnerability and exposed the cedi to potential sustained depreciation.
  • The last area of external vulnerability is the rate of foreign investor holdings of Ghana’s loan portfolio. The higher the foreign holdings of government debt instruments, the higher the amount of foreign currencies needed in our buffers to meet interest payments and principal on these debt instruments. It means that the country’s debt management strategy and monetary policy will have to pay special attention to foreign investor interests and sentiments. Any policy that hurts foreign investors could elevate the country’s vulnerability and lead to heightened portfolio reversals that could wipe out our NIR and collapse the cedi. By the end of 2018, foreign investors held 30% of our domestic bonds in addition of 49% of total debts of the country. This created a total foreign control of government debts at 66.7% at the end of 2018. As a matter of fact, Ghana currently has the highest external holding of domestic bond in any country in Africa. This means that our economy is the most vulnerable to foreign investor sentiments in Africa. The sad reality, however, is that the current managers of the economy do not appreciate the risk this pose to our economy. Instead, they ignorantly misconstrue it to mean increased confidence in the economy and go about taking decisions without due regard to the foreign investor sentiments. I was not therefore surprised when the Governor of the Bank of Ghana on April 1 said that the bank does not take decisions to please foreign investors but to satisfy the demands of domestic investor. This shocking revelation by no mean a person than the Governor of a central bank who has more than 66% of his country’s debts in the hands of foreign investors does not only reflect his level of shallowness, it exposes the level of incompetence that our economy drowning in at the moment.

Debt Developments and Foreign Holdings

Item 2018 2019-March
Domestic Debt 18,020.02 18,500
Foreign holdings at 30% (2018) & 6.3% (March 2019) of Domestic debt   5,406.01 5,550  
External Debt 17,895.61 21,650
Total Public Debt 35,993.69 40,150
Total Foreign Holding 23,301.62 27,200
Percentage Foreign 65% 68%
Percentage Domestic 35% 32%
Debt/GDP old series 72% 58%

            Source: BOG/MOF

Table 11

Ghana’s Hat-Trick of Embarrassment

  • Ladies and Gentlemen, Ghana’s rich culture of proverbs and wise sayings have a sweet way of teaching us smartness. Yet, the NPP seems oblivious of these. Among the Gurune people, of which I am proud to be one, there is a wise saying that is loosely translated as when a horse wants to floor you, you do not see its ears. That is exactly the dilemma that Ghana finds itself in at the moment under this Akufo-Addo and Bawumia administration.  Due to the two years of mismanagement and misguided policies shoved upon us by a group of people who specialise in bottling air for sale, Ghana’s economy is now suffering a high-grade fever and headed for coma if urgent measures are not introduced to reverse the situation. But instead of being concerned, the government is unmindful of this sheer reality and rather hosting Kenkey parties and townhall meetings to celebrate misfortunes and parrot polished lies at a time Ghana is rated as high-risk debt distress country, the economy is at the verge of exiting the list of top 10 places to invest in in Africa, our cedi is a laughing stock among its foreign counterparts and the Ghana Stock Exchange is now home to the world’s worst performing stocks. But are we surprised? Obviously no! The NPP’s level of insensitivity clouded by sheer arrogance and policy inferiority blinds it from the reality. Fortunately, you and I will not allow that to fester. As citizens with the wellbeing of the future generations at heart, we will continue to remind them of the reality, including rudely reminding them that the March 22 Kenkey Party at the Ministry of Finance was a celebration of a HAT-TRICK OF EMBARRASSMENT. This is why.

Exiting IMF a Failed Candidate

  • Mr Chairman, to tell you how we exited the IMF programme, permit to give you a scenario. Imagine you enrolled your child in a school for a three-year programme. In the second year, the child tells the school that he is not prepared for the final exam in the third year and as a result, the school should add him one more year. Magnanimous of his plight, the school grants the request for extension, making the programme a four-year one. In the fourth year, the year this child of yours said he will be prepared to excel in the exam, that same child writes to the school, requesting for waiver from being graded in some of the courses mainly because he had failed them. Out sheer magnanimity and in other not to keep this blockheaded of a student perpetually in the classroom, this school grants the waiver. Moments after leaving the school premises, the student organises a Kenkey Party and Townhall meeting to celebrate and parrot his successful graduation from the school. How embarrassed will you be, Madam Chairperson? The school in this scenario is the IMF Programme and the student is the indefatigable Akufo-Addo/Bawumia administration. Contrary to the lies told us, Ghana did not meet the criteria needed to exit the programme. Instead, our government begged its way out after failing the test.
  •  Ladies and gentlemen, in December 2015, our Net International reserves was US$3.1 billion from a gross international reserves of US$5 billion. This represented a rate of NIR build-up of 54% of gross international reserves. As a result of pragmatic measures to sustain and improve these reserves, the NIR rose to US$3.43 billion from a GIR of about US$6.2 billion in 2016. This represented a rate of NIR accumulation of 57% of gross reserves with Ghana’s balance showing a positive balance for the first time in decades. The passthrough effect of these pragmatic policy measures continued into 2017 with a build-up of NIR to about US$4.52 billion from a GIR of about US$S7. 6 billion, representing about 60% rate of build-up of buffers. These significant developments resulted in consistent decline in the rate of depreciation of the cedi against major trading currencies, especially the US dollar. The cedi which depreciated by 12% against the dollar in 2015 at the peak of the challenges began to slow its pace of depreciation to 9.8% in 2016 and further to 4.8% in 2017.
  • From 2017, when the clueless NPP took over power, they abandoned the policy measures of the NDC and began to implement politically-motivated monetary policy actions. These included the following;
    • Consistently reducing policy rates and governments borrowing rates on its instruments. These took place in the face of interest rate hikes in the United States of America amid global strengthening of the US dollar, which prompted investors to start exiting emerging and frontier markets with strong demands for American Government Bonds and demand for dollars. These began to affect forex flows from the capital account that traditionally provided liquidity to support the cedi and saved the BOG from using its reserves to intervene in the market thereby and making it possible for the central bank to build more reserves to improve resilience of the economy to withstand external shocks. By this, the BOG, led by the politically-constituted governors, recklessly began to undo all the gains over the three-year period of implementing the programme and focused on surprised but crude fiscal data to tout economic stability. Between 2017 and 2018, BOG had pumped a whopping US$2.5 billion of our hard-earned forex reserves on to the market, as it searched for unsustainable single digit exchange rate depreciation. This resulted in a drastic decline of NIR in 2018, leading to elevated levels of external vulnerability and volatility of the currency, far worse that the 2015 situation, when we faced the severe external shocks.
  • Below represent the level of external vulnerability that has hurt the cedi by close of 2018;
  • NIR declined by about US$1.5 billion from about US$4.6 billion to US$3.2 billion, representing only $100 million above the $3.1 billion recorded in 2015 after four gruelling years of sacrifices from Ghanaians under the IMF programme. GIR also declined sharply from US$7.6 billion in 2017 to about $6.9 billion by the end of 2018. The rate of NIR build-up from GIR deteriorated from 60% in 2017 to 47% in 2018, indicating a worsening of our buffers to meet the large size of forex requirement by 13%. In effect, the forward march in elevating our resilience was now put in reserve gear. This quickly took us back worse off than the 2015 rate of reserve build-up. The 2018 rate of NIR build-up was 7% below the 2015 levels, when Ghana went through its most turbulent period of global developments in almost a decade. The levels recorded based on the size of the foreign currency demands of the country represents the worse in the last five years.
  • The reckless and desperate attempt by BOG to further worsen our hard-earned reserves took a dangerous turn when BOG pumped in US$1 billion of NIR into the market that brought an artificial relief to the cedi for less than two weeks in March 2019.
  • In the middle of March 2019, the cedi had depreciated by almost twice as much as it did in the whole of 2017 at almost 9%. The cedi attained the contemptuous reputation of being the worst performing currency in Africa and has retained it till last night. Lest you forget, Mr Chairman, Dr Mahmoud Bawumia is still the Vice President and Head of the Economic Management Team of Ghana! But instead of bowing his head in shame, he is still going around spinning lies and seeking to blame the IMF for his own failure in the foreign exchange market. It is interested that Bawumia after just two years of a realty check has seen his smoothness level and discovered that external factors can cause a currency to depreciate and when it does because of that the depreciation cannot be blamed on fundamentals. Dear Dr Bawumia, is the external sector suddenly not part of the fundamentals of an economy?

The IMF captured its concerns over the deteriorating reserves and external vulnerability aptly when it asked the Government to up its game. After four years of work providing support and seeking to improve balance payment and reserves or buffers, the IMF had this to say’ ‘They recommended vigilance in monetary policy to guard against upside risks to inflation, including from exchange rate developments. Directors welcomed the authorities’ plans to rebuild international reserve buffers to ensure resilience to external shocks’.

The IMF was obviously worried about the deterioration in Ghana’s net international reserve buffers and the elevated vulnerability to external shocks due to the two years of reverse gear in dissipating the high NIR. Consequently, the fund challenged the government to rebuild these reserves. And that is curious. Curious because it means that after four years of a fund program, we failed woefully to meet a key measure of success and sustainability in building resilience to external shocks. What is more worrying is the government’s decision to throw caution to the wind after realising that the IMF was off its back. Contrary to the lies Bawumia will have believe, the Bank of Ghana has in the latter das of March squandered US$1 billion of the buffers that IMF even complained as being low. In place of this, they resorted to excess external loans to build unsustainable short-term buffers and further worsen vulnerability to external investor sentiment. By the end of February 2019, Ghana’s gross international reserves declined from a high of US$7.6 billion by end 2017 to US$6.3 billion, shaving off US$1.3 billion.

  • Faced with rising fiscal risks, financial sector in disarray and elevated vulnerability of the economy and Ghana unable to meet the IMF Performance Criteria to exit the ECF programme, the government nicodemously wrote to the IMF to forgive Ghana and grant us a waiver for non-observance of performance criteria. This was the second of the hat-trick of embarrassment when we admitted that after one more year of extending the programme from three years to four years, we were simply not good enough to pass the exam but could not continue to burden the IMF on its roll of students as a ‘dunderhead’ who will take forever to pass the exam.
  • Our Chairperson, it is interesting to note that the IMF gave a grey assessment of Ghana’s fiscal policy choices, external sector management and financial stability.
  • Whilst the IMF is warning Government to limit borrowing from foreign investors due to its impact on external vulnerability and exchange rate dynamics due to the need to work to satisfy foreign investor sentiments, Government was busy borrowing $750m short term to fill a gap in its failed domestic borrowing program for January and February 2019, thereby heightening further the vulnerability the IMF was warning them about. They went on to borrow a further $3 billion to accelerate the vulnerability.
  • Data obtained and analysed by Haver Analytics from the IMF, Asian Development Bank, RBI, BOG and Goldman Sachs to determine the level of vulnerability of a country based on foreign investor sentiment puts Ghana at a very high end of vulnerability. The study measured the percentage of a country’s foreign ownership of local currency bonds, with the highest percentage holding representing high vulnerability.
  • The study found that 30% of Ghana’s local currency bonds as at end of 2018 are held by foreign investors. This places Ghana’s cedi as the 6th highest vulnerable currency among 23 countries with high vulnerability, better than only the Peruvian Sol, Czech Koruna, South African rand, Indonesia rupiah and the Mexico Peso.

In Africa, the Ghana cedi is now ranked as the number 2 most vulnerability currency and subject to swings of foreign investor sentiments.

The cedi’s woes are essentially the results of two years incompetent and politically motivated monetary policy choices.  The IMF therefore warned these incompetent people to moderate the heightened vulnerability from foreign loans but guess what, they came to celebrate another dose of poison of $3.75 billion they have just injected into the cedi.

  • The IMF was unhappy with the excessive debt collaterisation and revenue monetisation. To this end the IMF said ‘Directors urged the authorities to limit debt collaterization and revenue monetisation to avoid encumbering revenues and creating seniority among creditors. They recommended caution with the planned financing scheme to build infrastructure projects and urged that these financing schemes be transparent, consistent with debt sustainability, and ensure value for money.
  • These are serious concerns that should worry any Government except a clueless and care-free one like the NPP. The IMF is worried over the excessive trend of encumbering future revenues thereby crowding out future fiscal space and creating inflexibility and righties in fiscal management. The IMF is certainly not comfortable with the Synohydro arrangements and has concerns over transparency, value for money and impact on debt sustainability. How can any responsible Government celebrate this terminal report of failure, ridicule and lamentation from your school teacher?

Issuance of Eurobond

  • In addition to embarrassment us with exiting IMF as a failed student and winning the prize for the worst performing currency in Africa, we then crowned it all with the most bizarre of all; borrowing US$ 3 billion at the highest interest rate by any country in Africa in 2019 and going ahead to celebrate such a disgraceful pricing of our sovereign bond. On the 19th of March 2019, Ghana offered investors the cheapest bond on the capital market, when we offered the highest interest rate for a sovereign bond in Africa up to March 2019. Ghana was a desperate country in need of cash at any price, leading to investor falling over themselves to get a slice of this cheap bond. In the end, US$21 billion chased Ghana to buy the cheapest bond from Africa. Let this sink in the heads of heads of Bawumia and the NPP, who are unable to appreciate the dynamics in the international capital market. The oversubscription was not because investors were philanthropists; it was because they had found a game which was more than willing to be hunted. Below are some of the features of the embarrassment.
  • Ghana was just three days away from a major verdict on the state of our economy and progress made on the ECF programme with the IMF. Investors know that any country under an IMF programme will get reduced risks if a positive announcement from the Fund is made about that programme. Therefore, the IMF announcement on the 22nd March 2019 would have immediately reduced the risks associated with Ghana’s Eurobond and saved Ghana about 2% on its coupon pricing. However, Ghana’s desperation to issue the bonds with just three days to the IMF verdict, signalled investors that Ghana was in trouble and did not expect any positive news from the Fund. They were desperate to issue the bonds ahead of the expected bad news from the IMF, which could spiral the coupon rate. Ghana went ahead and paid more for the bonds instead of waiting for the IMF pronouncement. That was a major embarrassment for Ghana because it meant that we did not trust the quality and standards of our performance with the IMF and was willing to pay the price for it. This was manifested in the fact that the yield to maturity of Ghana’s existing bonds on the market was around 5.6% for bonds with a coupon of 10.75% that were to mature in 2023.. This yield to maturity meant the following;
  • Investors were willing to pay a premium of 5.15% for our existing bond in order to earn a yield to maturity of 5.6%. That is to say that an investor was willing to buy a new bond of Ghana at a coupon of 5.6% barring any changes to the features of the bond. Ghana was however, offering to pay a coupon of 8.95%, giving the investor about 3.35% more free money for the next 30 years than the investor was prepared to take. With this, investors had just seen a desperate country that was willing to give more money not just for the next few years that the investors had locked in their investments in our 2023-year bond, but for 30 years. Consequently, they rushed in, with everybody looking for a share of the free money being given out by the Father Christmas called Ghana. Sadly, these investors found that two days later, Ghana was celebrating the disgraceful sale of the cheapest bond in Africa and must be now licking their lips for not asking for more.  They are must be lying in wait for our next Eurobond to ask for more.
  • A small country like Benin went to raise 500 million Euros a few days before our Eurobond issuance and for a six-year tenure. Until then, Benin had no experience and track record with the issuance of Eurobonds. Yet, the bonds were four-times oversubscribed but they got it for 5.6% per annum. This is almost 3% better than our seven-year bond. But unlike us, Benin did not throw a party to celebrate. Also, Bloomberg reported that Ivory Coast refused to issue its Eurobond around the same time we were in the market because it felt the interest rate was high. Checks revealed that what Ivory Coast declined to pay because it was high was 6.6%. But we gleefully offered 8.95% and went ahead to celebrate this obscene conduct.
  • Madam Chair, it is embarrassing that these clueless people just compare interest rates of several years ago to what they are paying today and make a decision withouat considering market conditions between the two periods. This is the height of incompetence and to note that Ken Ofori-Atta, who was parroted as one of the fine investment bankers is the one leading this charade, leaves much to be desired. Are we therefore saying that if interests rates were 25% in, say, 2011 and now market conditions have brought the rates down to 5%, it is okay to go and pay 12% (that is 7% more than investors are willing to take) and when you are asked why you paid 12% and not 5%, you answer by saying it is cheaper because it was 25% in 2011? God save Mother Ghana.
  • Let me also clear some misconception and use the opportunity to tutor the NPP on the dynamics around bond issuance. When investors invest in long term bonds, they do so in relation to the medium to long term economic outlook of the country. This outlook supports the ability of the country, not the current Government to meet the continued obligation of the semi-annual interest payments during the tenure of the bond and the principal on maturity.  Needless to say no investor will lend to government for 30 years because of the confidence it has in a government with a two-year expiry date without due regard to how it will be paid over the remaining 28 years after that government, which issued the bond is gone.


  1. Improve fiscal performance through revenue mobilisation. This should include improving compliance and efficiency in revenue administration
    1. Re-prioritise public expenditure to increase allocation to the capital budget to prop-up the ailing private sector.
    1. Re-align monetary policy to stem portfolio reversals whilst making efforts to increase Ghanaian holding of Government debt instruments.
    1. Develop a comprehensive program of trade facilitation to improve trade and industry in a way to support industrialisation and not import dependent distributive trade.
    1. Slow down on the rate of growth of the public sector to create fiscal space,
    1. Review the banking sector reforms to focus on hand-holding and helping challenged financial institutions and not collapse them.
    1. Cut down on the size of Government and channel the savings towards improving social protection and infrastructure development.
    1. Fulfil you campaign promise to abolish import duty on intermediate goods.
    1. Reverse the deteriorating economic and business operating environment.


Source: Daily Mail GH

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