GHS 25bn used in financing gov’t debt not GHS 70bn, BoG reacts to Adongo’s allegations
The Bank of Ghana has denied allegations by Member of Parliament for Bolgatanga Central, Isaac Adongo, that it illegally gave over GHS 70 billion to the government to finance maturing debts on the domestic market.
The Central Bank has the allegations as “false and unfounded” adding that the allegations are aimed at “impugning the hard–won credibility of the Bank of Ghana and its Management.”
The Member of Parliament for Bolgatanga Central, in an interview on Tuesday, November 8, averred the Governor of the Bank of Ghana, Dr Ernest Addison, has illegally given over GHS 70 billion to the government to finance maturing debts on the domestic market.
According to Mr. Adongo, the move by the central bank is contrary to the Public Financial Management Act.
“There are strict rules on which the Government of Ghana can borrow from the Bank of Ghana, and the strict rules are quite clear, stating that the Bank of Ghana at any point in time should not lend more than 5 per cent of the previous year’s revenue.
But reacting to the allegation made by the Member of Parliament for Bolgatanga Central, the Central Bank while admitting that it had financed government’s maturing domestic debts to prevent a domestic debt default situation, the GHS 70bn stated as the amount used in financing government maturing debts is untrue.
According to the Central Bank, only GHS 25. 6bn has been used as of 0ctber 2022, had been used to finance government’s maturing debts.
The Central Bank further argues that, its total claims on government [stock of government debt held by the Bank of Ghana] which reflects accumulated claims for over twenty years, including legacy assets such as the Telecom Malaysia Bonds issued in relation to the privatization of Ghana Telecom and Tema Oil Refinery Bonds and the financing of government’s maturing debts currently stands at GHS 40.2bn.
“The claims on government represent the stock of debt held by the Bank of Ghana and reflect accumulated claims for over twenty years, including legacy assets such as the Telecom Malaysia Bonds issued in relation to the privatization of Ghana Telecom and Tema Oil Refinery Bonds. At the end of December 2020, the claims on Government stock position stood at GH¢34.1 billion and includes the GH¢10 billion Covid-19 bond purchased by the Bank of Ghana. It would be recalled that in 2020, a request was made by the Government, through the Minister of Finance, to suspend the Fiscal Responsibility Act due to the Covid-19 pandemic.
“This was approved by Parliament together with the trigger of Section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended, and paved the way for the Government to issue a Covid-19 Bond which was purchased by the Bank of Ghana at the policy rate, with moratorium of two years.
“At the end of December 2021, claims on Government rose to GH¢34.8 billion, and have recently risen further to GH¢40.2 billion at the end of October 2022, reflecting an increase of GH¢5.3 billion in 2022, which was the result of pre-mature unwinding of positions held by some banks,” it said.
“In the first quarter of 2022, Ghana’s credit rating was downgraded and effectively shut out of the International Capital Markets. Consequently, there were no inflows from external sources to support budget implementation and the government started experiencing unsuccessful auctions on weekly basis. In the process, the Bank of Ghana had to step in and provide financing to keep government machinery running, and in particular, help prevent a domestic debt default situation. This activity is clearly shown in the Overdraft line in the table, which stood at GH¢25.6 billion as at October 2022. This support is temporary and consistent with crisis management as we work with the International Monetary Fund to design a debt operation that will lift the burden of debt servicing off the budget. The central bank has been transparent on these issues as spelt out in the September 2022 MPC Press release,” it added.
