Governor of BoG, Dr. Ernest Addison
The Bank of Ghana (BoG) has announced that it will support the government’s budget with GHc10 billion.
This is to help the government to better deal with the economic impact of COVID-19.
Speaking at the press conference after the 94th MPC meeting, the Governor of BoG, Dr. Ernest Addison, said the amount will include an initial amount of GHC5.5 billion cedis of the COVID-19 relief bond.
Currently, the central bank has an MoU with the International Monetary Fund that prevents it from financing government budget, Dr Addison said.
“Under the circumstances and in line with section 30 of the Bank of Ghana Act (2002) Act 612 as amended, the Bank of Ghana has triggered the emergency financing provisions which permits the bank to increase the limit of Bank of Ghana’s purchases of government securities in the event of any emergencies to help finance the residual financing gap,” he stated.
He added that “Today, under the Bank of Ghana’s asset purchase programme, the Bank of Ghana has purchased the government’s COVID-19 relief bond with a face value of GHc5.5 billion cedis at the monetary policy rate with ten-year tenor and a moratorium of two years; principal and interest.”
The Governor further explained that they will provide extra GH,4.5 billion cedis through the acquisition of government assets, but then again, that will be reliant on on developments going forward.
“The bank stands ready to continue with its assets purchase programme up to ten billion cedis in line with the current estimates of the financing gap from the COVID-19 pandemic,” he elucidated.
The Bank of Ghana since 2016 stopped financing the government’s budget which had been regarded as a condition for the overrunning of budgets in successive years.
Government has also passed the Fiscal Responsibility Act to control budget overruns as part of efforts to check expenditure.
This law, among others, sets a cap of 5% for Ghana’s budget deficit – which is the difference between the revenue and expenditure for any given year.
The law per the sanctions highlighted in it does not give room to any Finance Minister to flout this directive. The Minister in question is likely to face prosecution which could end in a jail sentence.
Meanwhile, the Resident Representative of the IMF to Ghana, Dr. Albert Touna Mama, has recommended that African governments focus on investments in health in the interim, and shelve discussions on possible escalations of budget deficits due to the default in loan repayments.
