Set limits for BoG financing of government budget – ISSER advocates

The Institute of Statistical, Social and Economic Research (ISSER) is advocating for the setting of financing limits of Bank of Ghana’s role in funding government’s budget.

In its assessment of the government’s 2023 Mid-Year Budget presented by the Finance Minister on July 31, Director of Research at the Institute, Prof. Peter Quartey explained that the deficit financing of BoG has adverse impacts on national inflation, cash inflows and exchange rate stability.

Dr Quartey cited Chile as a prime example of implementing strict legal restrictions which has no direct or indirect financing of public expenditures by the Central Bank (except under wartime conditions).

“Similar practices are observed in countries like Germany, Switzerland, and the Netherlands, where legislation enforces strict boundaries on direct central bank credit to the government, while permitting the acquisition of government paper through open market operations,” he added.

The ISSER Director touching on the GH¢65 billion impairment loss recorded in 2022 by the Bank of Ghana due government’s Domestic Debt Exchange Programme said, “BoG haircut on DDEP was necessary at the time but what brought us here should not be repeated. Deficit financing of GH¢53,150 million out of a total financing of GH¢65.156 billion”.

“Clear limits on government financing should be set and enshrined in our Laws,” Prof. Quartey added.

ISSER also called for strict fiscal and monetary policy measures aimed at achieving debt sustainability and price stability especially in the domestic economy while urging government to improve revenue mobilisation efforts and strict expenditure controls.

MA/NOQ

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