Minority opposes MoU signing on zero financing between BoG and Government
Ghana’s Finance Minister, Ken Ofori-Atta, has come under fire from the Minority in Parliament for his attempts to sign a Memorandum of Understanding (MoU) with the Bank of Ghana for zero financing for the government. The Tamale South MP, former Minority Leader Haruna Iddrisu, has described the MoU as “laughable” for the country, and has called for the Finance Minister to present legislation on zero per cent financing of the government by the Bank of Ghana.
The Bank of Ghana is said to have provided over GH₵40 billion in support to the government in 2021, and according to the central bank, the funding saved the economy from collapse. However, the International Monetary Fund (IMF) is among those demanding that the government enters into a binding agreement with the Bank of Ghana for zero financing of government programmes.
Speaking in an interview, the legislator said the Finance Minister must be present before Parliament for legislation on zero per cent financing of government by the Bank of Ghana. As a result, he noted that anything short of legislation passed by parliament will not be accepted. This move has caused some concern among financial observers, who fear that such a move could have negative consequences for the country’s financial stability.
Moreover, the Ghana Association of Banks has defended its decision to participate in the domestic debt exchange programme despite resulting in severe impairment of the assets of the institutions with some nearing insolvency. The association stated that its members will grant loans only to productive projects and will have to be careful in granting loans to customers.
The situation in Ghana underscores the challenges that many developing countries face when it comes to managing their economies. While there is often pressure to provide support to government programmes, such as infrastructure development, this can come at a cost to financial stability. The IMF has been pushing for greater transparency and accountability in government finances, and this move to zero financing is part of that effort.
However, the Minority in Parliament has argued that the move is not in the best interests of the country, and that legislation is needed to ensure that any such agreement is legally binding. This underscores the need for careful management of government finances, and for greater transparency and accountability in the financial sector.
In the end, it will be up to the government and the Bank of Ghana to find a way forward that balances the need for support for government programmes with the need for financial stability. The situation in Ghana is a reminder of the importance of sound financial management, both at the national level and at the level of individual institutions.
