Supporting government expenditure was critical to avert destabilization of economy - BoG

Central Bank Governor, Dr. Ernest Addison has defended the institution's decision to finance government’s expenditure in 2022.

According to him, the economy would have collapsed and faced a halt hence the Bank of Ghana's decision to provide government with the needed financial support as access to the International Capital Market was closed while the domestic market was also struggling.

Addressing participants at a stakeholder conference held in the Eastern Region on February 9, 2023, the BoG governor explained the rationale behind offering government the needed financial support.

“We need to remember where we are coming from at the beginning of 2022 when we lost access to the capital market. This is a government that had access to the capital market for at least $3 billion each year, but we started 2022 with the downgrading of the economy and, therefore, the source of financing was not available," he explained.

Dr. Addison added that, “In addition to that, the revenue measures were not working, with the revenue projections performing below targets. All those meant that government finances were in trouble, as expenditures needed to be funded, but there was no money.”

The BoG Governor further emphasized that it had become imperative for the Central Bank to come in and avert a possible destabilization of the economy during the period.

“It is important to recognise that we could have gone into this crisis much earlier than we went; if the BoG hadn’t stepped in, investors in government bonds were not going to be paid the interest,” Dr. Ernest Addison said.

Meanwhile, the Central Bank, has in the past few days, come under criticism following its decision to support government's expenditure in 2022 by way of printing new cedi notes.

The BoG in its response contended that the decision was not wrong since the Fiscal Responsibility Act, 2018 which was suspended by the Parliament of Ghana had not been reinstated.

In a statement issued on Thursday, February 9, 2023, the central bank disclosed that on a net basis, the BoG last year financed the government to the tune GH¢44.5 billion.

MA/FNOQ

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