Dr. Ernest Addison
The Bank of Ghana (BoG) has said the Member of Parliament for Bolgatanga Central, Isaac Adongo made unfounded allegations in his comments against Governor Ernest Adison.
According to the apex bank, Isaac Adongo, provided false data conjured without fact.
The Bank of Ghana noted that those allegations made by him are aimed at impugning the hard-won credibility of the BoG and its management.
In a statement issued by the BoG on Friday November 11, 2022 said “The claims on government represent the stock of debt held by the Bank of Ghana and reflect accumulated claims for over twenty years, including legacy assets such as the Telecom Malaysia Bonds issued in relation to the privatization of Ghana Telecom and Tema Oil Refinery Bonds. At the end of December 2020, the claims on Government stock position stood at GH¢34.1 billion and includes the GH¢10 billion Covid-19 bond purchased by the Bank of Ghana.
“It would be recalled that in 2020, a request was made by the Government, through the Minister of Finance, to suspend the Fiscal Responsibility Act due to the Covid-19 pandemic. This was approved by Parliament together with the trigger of Section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended, and paved the way for the Government to issue a Covid-19 Bond which was purchased by the Bank of Ghana at the policy rate, with moratorium of two years.
“At the end of December 2021, claims on Government rose to GH¢34.8 billion, and have recently risen further to GH¢40.2 billion at the end of October 2022, reflecting an increase of GH¢5.3 billion in 2022, which was the result of pre-mature unwinding of positions held by some banks.”
On lending claims are facilities granted by the international Monetary Fund (IMF) for onward lending to Government by the Bank of Ghana, the BoG said “IMF instruments and resources have been redesigned to provide budget support rather than balance of payments support, including recent resources from the RCF programme with Ghana and the RCF that was provided during the Covid-19 pandemic, and are therefore on-lent to the Government.
“These are denominated in US dollars and revalued in line with exchange rate changes. From the table, these claims have increased by an amount of GH¢17.8 billion from beginning of the year to October 2022. This reflects a revaluation of these claims in the Bank of Ghana’s books to account for exchange rate developments. This figure does not reflect Bank of Ghana’s lending to Government but rather resources from the IMF that were required to be passed on to Government in line with approvals by the IMF Board. And the increase in the amount in 2022 does not reflect new cash transactions but rather merely a book-entry figure, driven in large part, by the depreciation of the currency.”
The central bank continued that “Honourable Adongo also raised the issue that the Bank of Ghana has illegally borrowed US$7 billion through bridge financing, swaps, repurchase agreements etc. and therefore seeking funds to refinance this amount.
Swaps, repurchase agreements and sale and buy back transactions are legitimate operations conducted by all Central Banks for effective foreign exchange reserves management. Bank of Ghana has deployed these instruments since 2011 for foreign exchange liquidity management purposes. It is an important instrument for foreign exchange management by all central banks, as part of its treasury and reserve management functions. The global developments have resulted in tight financing conditions and these swaps have served as a significant source of foreign exchange liquidity for the economy.
“The total outstanding Swaps, Repurchase Agreements and sale and buy back transactions stood at US$2.4 billion at end October 2022, of which only US$720 million is expected to mature by the close of the year. We wish to assure the public that the Bank of Ghana is a reputable institution, which is professional with high standards. We have been recognised and awarded internationally on this score and all operations and policy decisions of the Bank are conducted with a high sense of duty and integrity to the best interest of the economy.”
Mr Adongo accused Governor of the BoG of illegally giving an amount of ¢70 billion to the government to finance matured debts.
The Deputy Ranking Member on the Finance Committee served notice to sue Dr Addison over the matter.
Addressing a press conference in Parliament on Tuesday November 8, he said “Ask yourself why the same taxes that we imposed on petroleum products two years ago to deliver a liter of 4. 50 pesewas.
“So essentially, now the problem is not even about the taxes, it is about the exchange rate. Who is supposed to manage the exchange rate? It is the Governor of the central bank Dr Addison.”
He added “Another big problem we have now is inflation. The Bank of Ghana manages the inflationary target framework whiles the Ghana Statistical Service reports actually 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.
“The inflationary targeting framework within the confines of the Bank of Ghana provided very strict rules on what we call fiscal governance over monetary policy, in other words there are strict rules on the government of Ghana can borrow from the Bank of Ghana.
“Those restricted rules are quite clearly stated that the BoG at any point in time should not have lent more than five percent of the previous revenue cumulatively. If you consider last year ‘s revenue then the government cannot even borrow five million Cedis from the BoG.
“But by the end of the year 2021, Dr Addison has illegally lent to government GH¢35billion, and by May this year he had added an additional GH¢22billion when the Minister came at Mid year review. As we speak today, Dr Addison has been financing government and paying maturing debt obligations the domestic market that the government cannot find, we are currently looking at something in excess of GHC7billion of illegally borrowing by the Government of Ghana from the BoG.
“If you have a corrupt government such as Akufo-Addo and Dr Bawumia and you pump GHC70billion to the economy that does not belong to the economy, they steal them and they put them in their rooms under their beds.
“Under the current circumstance, the best storage of money is Dollars and not Cedis. So Dr Addison’s GHC70 billion are now in the homes and beds of government functionaries, is what is chasing the Dollar.
“How can Dr Addison still be the Governor of the Central bank? I call on Dr Addison as a matter of urgency, to exit BoG and give Ghana the chance to clear the mess. Today, I have instructed my lawyers to serve him notice and to remind him again of a letter I served him, that if by the end of the third meeting of the second sitting of the 8th Parliament, he has not complied with his obligation to parliament for us to exercise our oversight role, I will sue him and I will proceed to court.”
By Vincent Kubi