The Director of Research at the Bank of Ghana (BoG), Dr. Philip Abradu-Otoo has defended the Central Bank’s decision to finance deficits in the 2022 budget.
He disclosed this while addressing a question on the need for fiscal dominance in the country at the University of Ghana 75th Anniversary Public Lecture on “Ghana’s Economic; The need for Paradigm Shift.”
Dr. Abradu-Otoo argues that the exigencies of the time left the BoG with no other option.
“From 2015 when we were on the 1st ECF we had a strict MOU between BOG and MoF and that has been respected from 2015 up until 2020 when covid struck and we had to change our modus operandi then this latest shock last year associated with debt. From the central bank’s point of view, we realized we needed an economy to protect, so there were choices that had to be made,” he argued.
Should we allow the economy the collapse or we should stick strictly to issues of fiscal dominance and then who picks up the pieces after the economy has collapsed,” he further quizzed
Dr. Abradu Otoo also revealed that all the financing by the central bank in 2022 was to pay mature investments.
“That financing that we did mainly in 2022 went to deal with domestic investors whose bonds had matured and government needed to pay these bonds for which government had no resources…we had to step in as the lender of last resort and allow the domestic investors to get their returns 100% of that amount was due to domestic but we did that to save domestic investors,” he added.
