Dr. Addison Calls for Reform to Ensure Government Settles Debts Within the Same Year

Dr. Ernest Addison, the Governor of the Bank of Ghana, has strongly advocated for a reform of the Central Bank’s Act, calling for a policy that would require the government to settle debts borrowed from the central bank within the same fiscal year. He emphasized that the failure to repay these debts promptly is having a detrimental effect on the operations of the central bank, as well as the overall stability of the country’s economy.
In an interview with George Wiafe on PM Express Business Edition, Dr. Addison stated that the ongoing accumulation of debt over the last two decades has created significant challenges for the financial sector. He explained that this situation has been exacerbated by the government’s failure to clear debts in a timely manner, which has contributed to the worsening financial condition of the country.
According to Dr. Addison, one of the core issues affecting the central bank is that the government has consistently failed to pay back loans borrowed from the Bank of Ghana. “The reforms I am suggesting aim to ensure that when the government borrows from the central bank, they are required to pay back within the same year. The Bank of Ghana’s records show that there are borrowings going back as far as the PNDC era that remain unpaid,” he explained.
The governor stressed that the delayed repayment of these loans has caused long-term negative consequences for the central bank’s balance sheet. He pointed out that the significant losses reported by the Bank of Ghana, such as the GH¢60 billion deficit, are not solely the result of recent borrowing, but rather the accumulation of unpaid loans over the years.
Dr. Addison further elaborated that the Bank of Ghana’s financial losses are a direct consequence of debts that have been outstanding for many years, dating back to the time of the Provisional National Defence Council (PNDC) government. “The GH¢60 billion loss reported by the Bank of Ghana is not due to loans borrowed within a single year. These are debts that have been carried over from earlier periods. To fully understand the financial situation, one must review the historical borrowing patterns and the outstanding debts that have not been repaid,” he added.
The Governor’s call for reform is rooted in the need for more stringent financial discipline when it comes to government borrowing. He argued that requiring the government to repay borrowed funds within the same year would help to prevent the accumulation of debt and the subsequent pressure on the central bank’s resources. This, he believes, would create a more stable financial environment and improve the central bank’s ability to manage the country’s monetary policy effectively.
In light of these challenges, Dr. Addison highlighted that the Bank of Ghana has embarked on a comprehensive reform agenda aimed at addressing the issues within the banking sector. This reform agenda includes strengthening the regulatory and supervisory frameworks in order to create a more resilient financial system. The Bank of Ghana is working toward cleaning up the sector and ensuring that it is better equipped to handle any future economic challenges.
Dr. Addison’s remarks underscore the urgent need for the government to adopt a more responsible approach to borrowing and repayment. By instituting reforms that compel the government to pay back borrowed funds within the same fiscal year, Ghana could avoid the negative economic consequences of long-term unpaid debts. This would also ensure that the Bank of Ghana’s operations are not hindered by financial instability, ultimately contributing to a healthier and more sustainable economy.
In conclusion, Dr. Addison’s call for a reform of the Central Bank’s Act is a crucial step toward addressing the longstanding issue of unpaid government debt. Through such reforms, the central bank would be better equipped to fulfill its mandate, and the country’s financial system would be more robust and capable of supporting the nation’s economic growth and stability.