The Bank of Ghana clarified its financing actions during the years 2020 and 2022, both marked by economic challenges arising from external and internal factors. The central bank disclosed that it provided substantial support to the government during these periods.
In 2020 and 2022, when the economy faced the impact of both external shocks and the Covid-19 pandemic, the Bank of Ghana extended financial assistance to the government. Specifically, the central bank allocated ¢10 billion in 2022 to address the Covid-19 crisis, and it initiated the Covid-19 Pandemic Bond on behalf of the government.
“First, it will be important to recall the circumstances under which the Government of Ghana decided to seek International Monetary Fund support. Ghana had lost access to the International Capital Market, domestic revenue was significantly underperforming and not realised, 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 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 the stable path”, it added.
Furthermore, due to the closure of the capital market in Ghana, the central bank disbursed ¢37.9 billion in 2022 as budgetary support to enable the government to manage essential expenses such as salaries and debt obligations.
The Bank of Ghana defended its actions by highlighting the dire circumstances that necessitated its involvement. The government faced challenges with access to the international capital market, plummeting domestic revenue, and a risk of default on both domestic and external debt payments. Given this context, the bank viewed its financial support as critical to maintaining stability and averting disorderly defaults.
The central bank clarified that its financing actions were part of crisis management strategies rather than business-as-usual decisions. It emphasized that the suspension of the Fiscal Responsibility Act, 2018 (Act 982) by the Ghanaian Parliament in 2020 due to the Covid-19 pandemic crisis contributed to the circumstances.
Addressing concerns about parliamentary oversight, the Bank of Ghana addressed a claim from the opposition. The majority leader, Osei Kyei Mensah-Bonsu, stated that the Bank of Ghana was not legally required to seek parliamentary clearance before exceeding the 5% budget deficit financing threshold. He explained that the central bank’s obligation was to report foreign exchange receipts to Parliament, a mandate that it had consistently fulfilled.