BoG beats retreat on printing GH¢22 bn to fund budget – Minority

The NDC minority caucus in parliament has cautioned the Bank of Ghana(BOG) to yield to Parliamentary oversight in its dealings, particularly in relation to money printing to finance government spending.

A statement issued by the minority leader, Haruna Iddrisu on Friday, August 19, 2022 said the fiscal dominance regime the bank is superintending is dangerous for the future and undermines the fight against inflation.

The minority leader in his statement said his side is taken aback by the controversial monetary printing that the BoG sneaked into its MPC Press Statement dated August 17, 2022, but had earlier denied as per its statement dated July 26, 2022.

“Ladies and gentlemen, the Caucus has noted with utter surprise the contents of the BOG MPC Press Statement dated August 17, 2022. Paragraph 6 stated, “In the absence of access to the international capital market and given the constrained domestic financing, central bank overdraft has helped to close the financing gap as reflected in the mid-year budget review. The Bank of Ghana is working with the Ministry of Finance to agree on a cap on the overdraft”.

“First, the Caucus wishes to state that Central bank overdraft is the same as monetary printing in the technical sense, which BOG tried to deny earlier as per its statement dated July 26, 2022.

“Second, given that BOG is now “working with the Ministry of Finance to agree on a cap on the overdraft”, BOG is acting in utter disregard for provisions in the Bank of Ghana Act, 2002 (Act 612) and the Bank of Ghana (Amendment) Act, 2016 (Act 918).

The minority leader further argued that there is nowhere in the Bank of Ghana Act, 2002 (Act 612) and the Bank of Ghana (Amendment) Act, 2016 (Act 918) where the BOG is mandated to arbitrarily grant central bank overdraft when there is lack of access to the international capital markets coupled with constrained domestic financing.

“Parliament has oversight and must mandate such an exceptional financing of government by the Central bank before execution,” he added.

Mr Haruna Iddrisu noted that most of the BoG’s actions in recent times are schemed to accommodate financing of government, without regard to the negative impacts of such dominance.

He warned that this is largely undermining the credibility of the Central Bank’s policy decisions and needs to be curtailed.

“It is as though the governor has been appointed a Minister by the Executive Arm of Government,” Mr Haruna Iddrisu suggested.

Background

The Bank of Ghana (BoG) denied allegations that it has printed GH¢22.04 billion in new money to finance the 2022 budget without recourse to Parliament.

It said the amount being referred to represented claims on government, and not new currency printed to support the government’s budget.

In a press statement dated July 26, 2022, the central bank said it found it necessary to provide clarity to the matter that was first raised by the Ranking Member of the Finance Committee, Dr Cassiel Ato Forson.

“The amount of GH¢22.04 billion represents net claims on government, and not new currency printed to support the government’s budget,” it said, noting that the net claims of GH¢22.04 billion comprised the stocks and bonds sold by banks, the country’s allocation of special drawing rights (SDRs) by the International Monetary Fund (IMF), drawdown of government balances with the central bank and negative on the government’s account owing to auction failures.