Dr Ernest Addison
The Bank of Ghana (BoG) has justified its reasons for financing the government’s 2022 budget with about GH¢44.5 billion.
According to the central bank, the support was part of crisis management tool used in addressing difficulties in 2022.
This follows a renewed discussions in the media regarding the Bank’s funding of the budget in 2022.
The Central Bank in a statement stated that “It will be important to recall the circumstances under which the Government of Ghana decided to seek IMF support. Ghana had lost access to the International Capital Market, and domestic revenue was significantly underperforming and not realized, pushing the state of government finances into near external and domestic default.”
“It must be recognized 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 crisis management tool used in dealing with the difficulties of 2022,” it said.
The Central Bank explained further that it had to help government finance critical expenditures to avert a disorderly default of both servicing for domestic and external debt including financing critical imports to keep the economy on a stable path.
The BoG debunked claims that the International Monetary Fund (IMF) uncovered the support when scrutinizing government’s document.
“First, it will be important to recall the circumstances under which Government of Ghana decided to seek IMF support. Ghana had lost access to the
International Capital Market, domestic revenue was significantly
underperforming and not realized, 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 challenged 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.
“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,” it clarified in the statement.
As a result, BoG noted that its net claims on the government increased by about GH¢44.5 billion at the end of December 2022.
By Vincent Kubi