Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye, has indicated that the Central Bank’s monetization of the country’s deficit is harming the economy.
According to him, the move is detrimental to the economy’s survival and must stop. He revealed that as the Central Bank continues to monetize the deficit through direct advances to government and takeover of maturing Treasury Bills, it must ensure that it is not breaching the lending ceiling and fiduciary currency issue.
“The Central bank’s massive monetization of the deficit through direct advances and take-over of maturing Treasury Bills is harming the economy and must stop!”
Dr John Kwakye
Dr Kwakye questioned how government got itself into a situation where it can’t pay its bills. He further probed whether the Ministry of Finance realized that if government doesn’t collect enough revenue and it spreads what it collects across a huge government machinery and flagship programs, sooner than later, the country will go broke.
“If the Ministry of Finance compels the Central Bank to monetize the deficit, then we should blame our own policies for fueling inflation and cedi depreciation. We shouldn’t blame external factors.”
Dr John Kwakye
Dr Kwakye expressed the need for government to institute an independent Inspector General, akin to that of the United States system. He highlighted that the system should be in every MDA to check corruption at the inception before it bears fruit.
“The IG will report directly to Parliament. Our current Internal Audit system is a monumental failure.”
Government’s redress of economic crisis
The IEA Research Director expressed no surprise that the President is meeting stakeholders to find solutions to Ghana’s economic crisis. He stated that the economic management team, tasked with the responsibility of proffering solution to the current economic crisis, should do the needful.
“Didn’t he say to BBC that he has experts in his Govt and doesn’t need to consult external experts? Why does the Economic Management Team not have answers to our crisis?”
Dr John Kwakye
Commenting on the country’s financial outlook, Dr Kwakye revealed that financial indiscipline is what is causing high inflation in the country. He noted the indiscipline is equally reflecting in the depreciation of the cedi.
“While we expect the Treasury and the Central Bank to collaborate positively, they are rather collaborating negatively as the former has been compelling the latter to monetize the deficit.”
Dr John Kwakye
Following the spiraling down of the economy, various stakeholders and experts have made suggestions as to how government can get the country out of its economic quagmire.
It will be recalled that Bolga Central MP, Isaac Adongo, accused Governor of the Bank of Ghana of illegally giving an amount of GHC70 billion to the government to finance matured debts.
The Deputy Ranking Member on the Finance Committee subsequently served notice to sue Dr Addison over the matter.
Addressing a press conference in Parliament on Tuesday, November 8, 2022, Mr Adongo stated that Bank of Ghana manages the inflationary target framework whiles the Ghana Statistical service reports, but the “man who is in charge of managing our inflation targeting framework and ensuring that inflation expectations are anchored, is the Governor of the Central Bank”.
He explained that the inflationary targeting framework within the confines of the Bank of Ghana provided very strict rules on fiscal governance over monetary policy. However, he noted that by the end of the year 2021, Dr Addison has illegally lent to government GHC35 billion, and by May this year he had added an additional GHC22 billion when the Minister came at mid-year review.
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