The Bank of Ghana says it will support the government’s budget with 10 billion cedis to enable it address the economic impact of COVID-19 on the country.
This will include an initial amount of 5.5 billion cedis of the COVID-19 relief bond. The Governor of the central bank, Dr. Ernest Addison, disclosed this at a meeting with journalists where he announced the policy rate.
By this decision, the Bank of Ghana has set aside a Memorandum of Understanding with the IMF which bars it from financing the government’s budget which had been the case in previous years.
The Governor further indicated that they will provide an additional 4.5 billion cedis through the purchase of government assets, but that will be dependent on developments going forward.
Since 2016, the Bank of Ghana has stopped financing the government’s budget which had been viewed as a condition for the overrunning of budgets in successive years.
As part of measures to control budget overruns, government has passed the Fiscal Responsibility Act.
The law, among others, sets a cap of 5% for Ghana’s budget deficit – which is the difference between the revenue and expenditure for any given year.
Per the sanctions outlined in the law, any Finance Minister who flouts this directive is likely to face prosecution which could culminate in a jail sentence.
Already, the Resident Representative of the IMF to Ghana, Dr. Albert Touna Mama, has advised African governments to focus on investments in health in the interim, and shelve discussions on possible escalations of budget deficits due to the default in loan repayments.
Source:Fiilafmonline/CitiBuss
