Dr Addison disputes claims of regular Government financing, cites legal adherence to BoG Act
Dr. Ernest Addison, the Governor of the Bank of Ghana, vehemently refuted allegations of consistent government financing by the central bank during a special press briefing held on Monday.
In his clarifications, he underscored that the Bank’s actions have adhered to legal constraints and have been contingent upon extraordinary circumstances.
Addressing recent assertions, Dr. Addison categorically stated, “It is not true that Bank of Ghana has been providing financing for the Government every year.”
He backed his statement with a timeline, pointing out that the Bank extended zero financing during the years 2017, 2018, 2019, and 2021.
Instead, the Bank’s interventions were predominantly confined to the pandemic year of 2020 and the crisis-ridden year of 2022.
Dr. Addison further elaborated on the legal framework underpinning the Bank’s actions, referencing the Bank of Ghana Act (612), which governs the financing of the Government.
The legislation caps the financing of the Government at 5 percent of the previous year’s tax revenue. The Governor affirmed that this provision has been diligently adhered to since he assumed office in April 2017.
Highlighting the Bank’s commitment to fiscal restraint, Dr. Addison revealed an additional layer of scrutiny. Between 2017 and 2019, the Bank proactively augmented the Bank of Ghana Act (612) by entering into a Memorandum of Understanding (MOU) with the Ministry of Finance.
The MOU imposed an even stricter constraint, completely disallowing central bank financing, even though MOUs are not legally binding. He emphasized that this stringent limitation was meticulously followed during those years.
Drawing a sharp contrast from prior years, Dr. Addison recollected the period between 2012 and 2015, during which the Bank of Ghana extended overdrafts annually to finance government and Cocobod, despite the absence of pandemic or global economic crisis.
The Governor shed light on the Bank’s response to the COVID-19 crisis in 2020, clarifying that the actions undertaken were within the bounds of the law. He specified that Section 30(6) of the Bank of Ghana Act (612), as amended, was invoked, authorizing the Bank’s purchase of GHC10 billion worth of Covid-19 bonds to bolster the economy.
Elaborating on the legal intricacies, Dr. Addison noted that Section 30 (6) activation allows a collaborative decision-making process involving the Governor, the Minister for Finance, and the Controller and Accountant General.
The resultant agreement on a new limit of central bank financing is then subject to the requirement of notifying parliament. The Minister of Finance has indeed apprised parliament of these developments as part of his update on the IMF program and the status of the Domestic Debt Exchange.
Dr. Addison’s clarifications were conveyed during a special press briefing, held on Monday, August 21, 2023, aiming to provide transparency and factual context to the Bank’s 2022 financial statement and actions in recent years.
