The Central Bank of Ghana in a public press statement has disclosed that its attention has been drawn to renewed discussion in the media regarding BoG’s financing of the budget in 2022.
Despite the fact that this particular issue has been comprehensively addressed by the Bank of Ghana in an earlier press release, dated 11th November 2022, and more recently at the Monetary Policy Committee press conference on 30th January 2023, Bank of Ghana has been compelled to re-state its earlier assessment, address misinformation and inaccuracies, and to anchor the discussions in the public domain.
To initiate with its explanations, the Central Bank Of Ghana recalled the circumstances under which the Government of Ghana decided to seek IMF support.
Ghana, according to BoG, had lost access to the International Capital Market with her domestic revenue significantly underperforming and not realized, hence, pushing the state of government finances into near external and domestic default.
With the above, BoG revealed that the policy choices were not that of business as usual but rather a more challenged conduct of macroeconomic policy in the context of crisis.
The government, as stated by BoG however needed to finance critical expenditures for which the Bank of Ghana needed to provide the necessary financing to avert a disorderly default of both servicing for domestic and external debt, including financing critical imports to keep the economy on the stable path.
“In fact, while the team from the International Monetary Fund (IMF), who assessed the situation of the economy, noted that this outcome is sub-optimal, it was agreed that this temporary arrangement was needed as part of a comprehensive solution to be addressed in the Government’s economic policies and programmes to be supported by the IMF.
“And so, the indication in the media that the IMF came and uncovered the extent of the overdraft is wholly inaccurate.”
Bank of Ghana
Elaborating further to clear misconceptions and false rumors on the 2022 Budget deficit, the Central Bank of Ghana in its communique revealed that the ongoing debt operations are part of the corrective measures designed to address the financing problem of the budget.
“Bank of Ghana financing was part of a crises management tool used in dealing with the difficulties of 2022.”
Bank of Ghana
It was observed that in 2020, the Parliament of Ghana suspended the Fiscal Responsibility Act, 2018 (Act,982) in view of the crises precipitated by the COVID-19 pandemic. The Fiscal Responsibility Act has not yet been reinstated by Parliament.
Bank Of Ghana’s Claims On Government
Against this backdrop, the Central Bank of Ghana declared details of BoG’s claims on Government as at December 2022.
According to BoG, GH¢ 7.2 billion represented Bank of Ghana’s purchase of treasury bonds from banks to provide them with liquidity and to enable them meet their obligation to customers.
Also, BoG in its statement divulged that GH¢ 8.9 billion represented on-lending facilities granted by the international Monetary Fund (IMF) for onward lending to Government.
The statement noted that GH¢ 37.9 billion represented overdraft extended to Government, solely meant for the purpose of addressing auction shortfalls and paying customers whose bonds had matured and for which Government did not have adequate resources.
At the same time, Government Deposit liabilities at the Bank of Ghana, as reported in the statement recorded an increase of GH¢ 9.5 billion in the course of 2022.
Not limited to that, BoG indicated that on a net basis, putting together all claims and netting off all deposit liabilities, these transactions resulted in an increase in Bank of Ghana’s net claims to the Government by GH¢ 44.5 billion.
BoG in its conclusion disclosed with optimism that the statement released will provide answers to questions asked during the presentation of the 2023 budget by some ministers.
“We would like to draw the public’s attention to the statement made by Hon. Haruna Iddrisu during the 2023 budget discussions in Parliament in which he requested the finance minister to brief Parliament on the extent of Bank of Ghana’s financing of the Government’s budget and on the new limit agreed. We expect that this will be complied with.”
Bank of Ghana
