Government likely to rely on Bank of Ghana for financial support – Research institution

• Ghana not expected to return to international capital markets this year

• Bank of Ghana lended to government GH¢10 billion in 2020

• Ghana often relies on the Eurobond issuance to finance debt

International research institution, REDD Intelligence has hinted that the Government of Ghana is likely to rely on the Bank of Ghana for financial support, a Joy Business report has said.

The development comes after the Ministry of Finance has indicated Ghana is not expected to access international capital markets this year to issue Eurobond due to the current market strong conditions, strong reserve position and the recent US$1.007 billion Special Drawing Rights (SDR) allocation for Ghana from the International Monetary Fund.

“The lack of Eurobond financing raises the questions of which other funding sources are available for the government to finance the deficit and upcoming debt maturities. The government has frequently turned to the Bank of Ghana (BoG) for financing when sufficient funds have not been available from other creditors, most notably in August to December last year,” REDD Intelligence said.

“Finance Minister Ken Ofori-Atta had previously stated that the government would withdraw the full SDR allocation in order to support the economy by directing the funds to sectors that will aid in job creation, as well some areas under the Ghana Cares economic recovery programme. However, the political opposition, most notably former Finance Minister, Seth Terkper, has argued that the government must seek proper parliamentary approval to appropriate the SDR funds. This is in line with official IMF advice”, it stressed.

The research institution further explained that, “Ghana’s parliament is hung since the December 2020 elections, but parliamentary approval is unlikely to be a major hurdle for the government to receive financing from the BoG in one form or another.”

Already, Governor of the Bank of Ghana, Dr. Ernest Addison has ruled out the provision of further loans to the government in order to help it address budget and expenditure shortfalls.

Some analysts have also predicted more loans granted by the central bank could likely place Ghana’s exchange rate stability at risk.

Following the onset of the coronavirus pandemic, the Government of Ghana received lending support in the amount of GH¢10 billion from the Bank of Ghana to mitigate the adverse impact of the pandemic.