Dr Ernest Addison, BoG Governor
GOVERNMENT’S EXPENDITURE in 2020 expanded the stock of public debt which rose to 74.4 per cent of GDP (GH¢286.9 billion) at the end of November 2020 compared with 62.4 per cent of GDP (GH¢218.2 billion) at the end of December 2019.
Of the total debt stock, domestic debt was GH¢147.3 billion (38.2 per cent of GDP), while external debt was GH¢139.6 billion (36.2 per cent of GDP).
The latest monetary policy committee (MPC) report of the Bank of Ghana (BoG), which disclosed this, said provisional data released by the Ministry of Finance as at November 2020, depicted an overall broad cash budget deficit of 10.8 per cent of GDP against the target of 11.4 per cent of GDP for the year. It also said the primary balance recorded a deficit of 4.9 per cent of GDP which was marginally above the target of 4.8 per cent of GDP.
Revenue and Grants
Over the review period, it said total revenue and grants amounted to GH¢46.5 billion (12.1 per cent of GDP), marginally higher than the revised target of GH¢46.0 billion (11.9 per cent of GDP) while total expenditures and arrears clearance amounted to GH¢88.2 billion (22.9 per cent of GDP) against the revised target of GH¢88.4 billion (22.9 per cent of GDP).
The BoG continued that total liquidity increased significantly during the year driven by government’s fiscal stimulus programme, the complementary monetary policy measures implemented during the year to mitigate the impact of the Covid-19 pandemic and the monetization of government bonds to pay depositors in the SDI sectors, as well as the central bank’s purchase of a GH¢10 billion Covid-19 bond issued by the government.
BoG’s Balance Sheet Expand
“These policies led to a large expansion in the balance sheet of the central bank. As a result, Net domestic assets increased by 42.2 per cent year-on-year in 2020, compared with a modest 15.0 per cent growth in 2019, while net foreign assets contracted by 12.6 per cent, compared with 51.7 percent growth in the same comparative periods. Broad money (M2+) grew by 29.6 per cent in 2020, compared with 21.7 per cent growth in 2019. The expansion in money outside banks was mainly on account of increased growth in net domestic assets of the depository sector. The growth in broad money reflected in expansion in currency outside banks and domestic deposits.
Commercial Banks
Additionally, it said commercial banks’ balance sheets also saw growth during the year due to the expansionary government policy and the increase in deposits mobilised from the SDI sector due to a flight to quality from depositors in the SDI sector.
“Total deposits increased by 26.8 per cent, and net claims on government by commercial banks increased by 44.6 per cent. On the other hand, credit extended to the private sector moderated throughout 2020.
Private Sector Credit
“On an annual basis, net credit to the private sector slowed to 5.8 per cent in December 2020 compared with 23.8 per cent in the corresponding period in 2019. On a gross basis, credit to the private sector grew by 10.6 per cent compared with 18.0 per cent over the same comparative period,” it emphasised.
BY Samuel Boadi