February 10, 2023

BoG Justifies Financing 2022 Budget

The Central Bank of Ghana has provided justification fo the  provision of GH¢ 44.5 billion in funding the 2022 Budget Statement and Economic Policy.


It will be recalled that in July 2022, the minority in Parliament accused the Bank of printing 22 billion cedi notes to fund government expenditure without Parliamentary approval.


The BoG released a statement clarifying that the amount as captured in the Mid-Year Budget Review did not represent printed notes but net claims on the Government.


After the presentation of the 2023 Budget Statement in November, the Minority again raised concerns that the Bank was over-financing the budgets of the government.


Following renewed concerns about the Central Bank’s funding of the 2022 Budget, it has released a statement justifying it.


“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.”


It said it had to provide the funds for some critical expenditures “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, “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.”

Also, it said its action was a crisis management measure to address financing problems in the budget.


It explained, “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.”


As of December 2022, the Bank of Ghana’s net claims to the Government stands at GH¢ 44.5 billion.


The net claims include: GH¢ 7.2 billion, representing Bank of Ghana’s purchase of treasury bonds from banks to provide them with liquidity to enable them meet their obligation to customers; GH¢ 8.9 billion, representing on-lending facilities granted by the international Monetary Fund (IMF) for onward lending to Government; GH¢ 37.9 billion, representing 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; and  GH¢ 9.5 billion representing  Government Deposit liabilities at the Bank of Ghana in 2022.

Source: opemsuo.com/Hajara Fuseini

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