Last week, the Bank of Ghana took the highly unusual step of publicly taking on one of its immediate past deputy governors. This was in response to an equally unusual public attack on the current management of the central bank made on a leading FM radio station, by the immediate past 2nd Deputy Governor, Dr Johnson Asiama. In a nutshell, Dr Asiama found reason to criticize the current BoG management for finding fault with how its predecessors had handled the insolvency that had afflicted Ghana’s banking industry. In turn, the BoG’s current management subsequently issued a public statement defending its actions by explaining why its predecessors, Dr Asiama inclusive, were indeed at fault in their handling of the crisis.
Indeed, while we find little reason to fault the steps taken by the BoG since it began its financial sector clean up exercise in August 2017 with the revocation of the licenses of Capital Bank and UT Bank, we have called for reticence in the central bank’s current management’s tendency to publicly blame its predecessors for the situation.
Our worry is that the entire ruckus is ultimately exposing just how political an institution the BoG really is despite its supposed independence from the executive arm of government. While both Dr Asiama on one side and the incumbent management of the BoG on the other are trying to disguise their respective positions behind technical issues, it is clear to virtually every operator, analyst and commentator in Ghana’s financial intermediation industry that their arguments are in actual fact for and against the political parties that appointed them to the top hierarchy of the central bank in the first place. The real argument therefore is about which of the two major political parties has used the central bank to do the best thing for the national economy.
The politics behind this is illuminated by the very manner in which two of the three topmost executives of the BoG replaced their predecessors before the latter’s contracts had run out, following a change of political administration. Prior to this change the contracts of the BoG ‘s Governor and his Deputies closely mirrored the tenure of each political administration, allowing each newly elected President to select a BoG executive management of his choice. This tidy arrangement was however scuttled during the most recent tenure of the National Democratic Congress when two unscheduled changes of BoG Governor occurred leading to a situation where both the Governor and 2nd Deputy Governor appointed by an NDC President (John Mahama) had long periods of their respective contracts to run when a New Patriotic Party President took office. This led to a very untidy change of both Governor and 2nd Deputy Governor – indeed the latter involving the replacement of Dr Asiama was openly acrimonious.
The ongoing war of words over the handling of the financial sector clean up is simply a continuation of this squabble between the respective BoG managements on behalf of who appointed them.
Considering that the BoG is supposed to be a politically independent institution, the ongoing situation is unsavory. While Ghanaians have become used to the politicization of virtually every institution of state, the international financial community is only comfortable with politically independent central banks.
We therefore call on both sides in the ongoing ruckus to, for the sake of the well being of Ghana’s economy, pretend that the BoG is politically independent. As the old adage goes, do not wash your dirty linen in public.