Government's BoG recapitalisation plan backed by law - Isaac Adongo

The Ranking Member on Parliament’s Finance Committee, Isaac Adongo, has defended the government’s decision to recapitalise the Bank of Ghana over a number of years, insisting that the move is necessary to restore the central bank’s financial health despite concerns about potential future fiscal pressure.

Speaking in an interview on Channel One TV's Point of View, the lawmaker said the current administration inherited a situation in which there was no clear programme to recapitalise the central bank, arguing that the previous government failed to address the issue before leaving office.

He criticised former Finance Minister Dr Mohammed Amin Adam for not putting in place any roadmap to restore the bank’s capital position.

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“Something has to be done to recapitalise the bank. The current government assumed office on the back of a government that left without a programme to recapitalise the bank. Mohammed Amin had no idea of recapitalising the bank when he was leaving, and he was comfortable to leave the bank without it being recapitalised,” Adongo stated.

He further explained that the current recapitalisation plan is backed by law and has received parliamentary approval, including support from members of the previous administration.

“Today, somebody has a programme anchored in law, passed by he himself. He made all the debate on the floor and agreed that it should pass. It is being implemented,” he added.

The MP also noted that both the Ministry of Finance and the Bank of Ghana are aligned on the need for a recovery roadmap, stressing that the recapitalisation process cannot be delayed indefinitely.

“The central bank itself is aware that we cannot continue on this path forever. The central bank and the Minister of Finance are agreeable that there must be a roadmap to recapitalising the bank. And that will be done,” he said.

Adongo also disclosed that Parliament has already approved legislation granting the Finance Minister a number of years to implement the recapitalisation programme.

“The Minister has a commitment to do that. He has brought that to Parliament and there is a law giving him a number of years to recapitalise the bank. I have not heard him say anywhere that he will not respect that law,” he stated.

He argued that the current fiscal pressures facing the economy differ significantly from those experienced under the previous administration.

According to him, past fiscal dominance was driven by external borrowing and monetary expansion, whereas current economic activity is being supported largely by domestic productivity and internally generated resources.

“A lot of the fiscal dominance that we saw in the past was dominance emanating from borrowing externally to fund the budget and largely financed by printing of money. Whatever fiscal dominance we are seeing now is organically created by the economy, which means that there is output to support that dominance,” he explained.

He added that the present situation is preferable because inflationary pressures are being moderated by productive economic activity rather than excessive borrowing or monetary financing.

However, Adongo cautioned that recapitalisation itself comes at a cost, warning that although the process has been spread over several years, government must ensure the burden does not eventually return to taxpayers through future fiscal pressures.

SO/MA

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