The Bank of Ghana (BoG) has reiterated that financing the 2022 Budget Deficit was part of a crisis management tool used to deal with the difficulties in 2022.
This was stated in a rejoinder issued by the BoG on Thursday after its attention was drawn to renewed media discussions regarding the financing of the 2022 budget.
It stated, “While this particular issue has been comprehensively addressed by the Bank of Ghana in an earlier press release, dated 11th November 2022, and more recently at the Monetary Policy Committee press conference on 30th January 2023, Bank of Ghana is compelled to re-state its earlier assessment and address misinformation and inaccuracies, and to anchor the discussions in the public domain.”
The BoG noted that in 2022, the Parliament of Ghana suspended the Fiscal Responsibility Act, 2018 (Act,982) because of the crisis precipitated by the COVID-19 pandemic which has not yet been reinstated.
“First, 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, 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 challenging conduct of macroeconomic policy in the context of crisis. The government needed to finance critical expenditures for which the 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 a 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 emphasized.
The statement pointed out that against this backdrop, the Bank of Ghana’s claims on the government as of December 2022 were GH¢7.2 billion, representing the Bank of Ghana’s purchase of treasury bonds from banks to provide them with liquidity to enable them to 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.
The rest were ¢37.9 billion, representing overdraft extended to the government, solely meant for addressing auction shortfalls and paying customers whose bonds had matured and for which the government did not have adequate resources.
“At the same time, Government Deposit liabilities at the Bank of Ghana recorded an increase of GH¢ 9.5 billion in 2022; On a net basis therefore, putting together all claims and netting off all deposit liabilities, these transactions resulted in an increase in Bank of Ghana’s net claims to the Government by GH¢ 44.5 billion,” it added.
The ongoing debt operations according to the BoG, are part of the corrective measures designed to address the budget’s financing problem.
Patience Anaadem, ISD
