We only financed government in 2020 and 2022 with ¢10bn, ¢37.9bn – BoG

The Bank of Ghana says it only finance the government in 2020 and 2022 when the economy was hit by external and internal shocks.

According to the Central Bank, it provided ¢10 billion in support to the government in 2022 due to the Covid-19 pandemic.

In this regard, the it launched the Covid-19 Pandemic Bond on behalf of government.

Again, in 2022, it provided ¢37.9 billion as budget support to the government to pay salaries and settle government debt maturities as capital market shut down access to Ghana.

The Central Bank, therefore, noted that it did nothing wrong in financing the government at a time the economy was in dire trouble.

“First, it will be important to recall the circumstances under which the Government of Ghana decided to seek International Monetary Fund support. Ghana had lost access to the International Capital Market, domestic revenue was significantly underperforming and not realised, pushing the state of government finances into near external and domestic default. With the above, the policy choices were not that of business as usual but rather a more challenging conduct of macroeconomic policy in the context of crisis”.

“The government needed to finance critical expenditures for which 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”, it added.

Secondly, the BoG said, the ongoing debt operations are part of the corrective measures designed to address the financing problem of the budget, adding “Bank of Ghana financing was part of a crises management tool used in dealing with the difficulties of 2022”.

It further that the Parliament of Ghana in 2020 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.

Majority Leader, Osei Kyei Mensah-Bonsu had earlier dismissed the minority claim that the Bank of Ghana (BoG) should have obtained clearance from Parliament before lending to government above the 5% budget deficit financing.

According to him, there is no law that mandates the BoG to report its daily activities to Parliament.

Rather, he said, the law only mandates the Central Bank to report foreign exchange receipts to Parliament, and the BoG has thus always complied with this provision.