Bank of Ghana blames huge operational expenditures on Cedi depreciation and inflation.

The Bank of Ghana (BoG) has responded to accusations of mismanagement by the Minority in Parliament and explained the factors behind the “sharp jump” in its operational expenses during the 2022 financial year.

The central bank attributed the increase in expenses to the significant depreciation of the Cedi against the Dollar and the rise in inflation.

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BoG stated that the depreciation of the Cedi against the Dollar and the inflation rate in 2022 directly affected various operational expenses. This included vehicle maintenance, communication, foreign and domestic travels, and External Directors’ expenses, among others

The financial institution emphasized that the year 2022 marked a period of economic and social crisis in Ghana. The central bank explained that comparing the financial performance of 2022 with that of 2021 without considering the economic situation would be misleading.

Another reason BoG gave for the significant increase in vehicle maintenance expenses was fuel costs, which rose by 123.3% in 2022 compared to 28.9% in 2021. This increase was attributed to a substantial rise in petrol and diesel prices during the year.

“For 2022, the fuel cost increased by 123.3 per cent compared to 28.9 per cent 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 GHC 16.5811 per litre of petrol and GHC19.6053 per litre of diesel at the end of 2022. This implies increases of 149 per cent (Avg. 87 per cent) and 194 per cent (Avg. 122 per cent).”

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The bank which was recently in the news for incurring a huge cost of over 60 million Cedis clarified that the debt restructuring policy approved by Parliament in the 2023 budget statement, had implications beyond parliamentary approval.

The adoption of the International Financial Reporting Standards (IFRS), specifically the Expected Credit Loss (ECL) principle, meant that debt restructuring announcements would trigger ECL applications and impairments regardless of parliamentary approval.

“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,” The bank said

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The central bank explained the need for a new headquarters, stating that the current office, constructed in the 1960s, was no longer suitable and lacked the required strength to withstand significant seismic or wind events. BoG’s goal of positioning Ghana as a financial hub in the sub-region was a driving factor in the decision to prioritize a new head office building.