BOG Re-affirms fight Against Inflation

BoG EXPOSES STATESMAN

The Bank of Ghana (BoG) , the nation’s only ‘banker of banks’ has vehemently refuted allegation in the right-wing Statesman newspaper that there was a pressure from the government on it to commit an awful monetary crime and print 1.5 billion Ghana Cedis.

In a rejoinder, the Bank said there has never been any request from the government or any other authority on it to embark on a suicidal monetary policy and on the contrary is focused on its campaign of fighting the fire of inflation and the unwise and loose monetary policy adopted by the New Patriotic Party (NPP) government.

“As in most Central Banks, the Bank of Ghana is the fiscal agent and banker of government. The framework for its dealings with government is provided in the Bank of Ghana Act 2002, Act 612. Therefore, the Bank of Ghana can be requested to assist government to streamline its finances and budgetary activities due to the occasional lack of synchronization between government revenue flows and expenditures as happens in most countries.

“In the particular case that is the subject in your publication, government sought the general assistance of the Bank of Ghana, as normal practice, to raise GHc 1.5 billion over a period to augment its fiscal resource base so as to meet outstanding arrears that accumulated in 2008 and were not known at the time of preparing the budget. The amount was to be raised over a period of time so as not to compromise macroeconomic stability.

“Indeed, there are several alternative ways by which the Bank assists government in such cases. For example, the Bank may decide to float government bills or issue bonds to the domestic market on behalf of government, or the Bank may grant temporary advances to government subject to the statutory limits provided in Section 30 of Act 612.

“In each case, the Bank of Ghana ensures that the appropriate financing method is used, that will not impact adversely on macroeconomic stability. In any case, it is even not feasible or prudent to print currency of such magnitude in such a short period of time”, the rejoinder asserts.

After assuming the reigns of government, the new governing National Democratic Congress (NDC) suddenly realized the appalling nature of the economy left behind by the retreating New Patriotic Party (NPP) government, which hitherto was parroting macro-economic achievements which were non-existent.

The now suffocating twin deficits of fiscal and current account and a broke treasury left behind by the NPP have put the nation’s public finances in an unspeakable quagmire.

According to a report by the well-respected Institute of Statistical, Social and Economic Research (ISSER), University of Ghana, Legon, the “significantly larger deficits compared to target levels for the year occurred in spite of the fact that total government revenue exceeded programmed levels.”

The think-tank therefore maintains that the only explanation for this loss of fiscal credibility by the NPP government can only be found in the loss in discipline with regard to government expenditure, among other issues.

The new NDC government has put in place measures to restore health to the ailing economy it has inherited. Among the major ones are the drastic reduction in inflation and inflationary pressures, arresting the raging fiscal firestorm and putting appropriate monetary tools to check lending rates.

Inflation, which has now been stabilized at around 20 per cent, is expected to decline to between 7-9 percent in 24 months. This figure, if attained will be akin to the single digit inflation of 9.4 per cent achieved in May 1999 when the NDC was in power. Coincidentally, this was the period that the current Finance and Economic Planning Minister, Dr Kwabena Duffuor was the Governor of the Central Bank and in charge of the nation’s monetary policy.

Again, the NDC also in March 1992 achieved a single-digit inflation of 7.3 percent. However, the NPP, despite its claim of economic achievement while in government was never able to push inflation to a single digit.