Governor of the Bank of Ghana (BoG) Dr Ernest Addison has reiterated his point that the Bank of Ghana (BoG) did not print cash to finance the government budget in 2022.
Speaking at the 111th Monetary Policy Committee (MPC) press conference in Accra on Monday, March 27, he stated that the central bank has enough cash sitting in its vault.
If it becomes necessary, the BoG releases the cash to support the economic demands, he said.
Answering questions from journalists at the event, Dr Addison said “First and foremost, Bank of Ghana’s forecast for currency printing does not include government financing needs, we make an estimate of the GDP for the year, a major factor in that is the cocoa production forecast. So that is what goes into forecasting currency printing requirements.
“If you go to the Bank’s office at Spintex Road we have our currency processing center there, we have a vault full of Cedis so we don’t need to print money, we already have cash sitting in our vault and release these resources as an when the economy demands that.
“So the impression that Bank of Ghana prints money to finance overdraft is completely wrong, it is a mischievous way of presenting the issues.”
Earlier, Dr Addison defended the central bank’s decision to finance government expenditure in 2022.
He said the economy would have been destabilised and come to a standstill had the BoG not stepped in to support the government.
Speaking at the SIGA annual stakeholder meeting in Kwahu Abetifi in the Eastern Region yesterday, Dr Addison said: “We need to remember where we are coming from at the beginning of 2022 when we lost access to the capital market.”
“This is a government that had access to the capital market for at least $3 billion each year, but we started 2022 with the downgrading of the economy and, therefore, the source of financing was not available.
“In addition to that, the revenue measures were not working, with the revenue projections performing below targets.”
“All those meant that government finances were in trouble, as expenditures needed to be funded, but there was no money,” he said.
He said the central bank, therefore, had to step in to help the country go through those difficult times.
“It is important to recognise that we could have gone into this crisis much earlier than we went; if the BoG hadn’t stepped in, investors in government bonds were not going to be paid the interest,” he said.
The central bank came under pressure in recent times over its decision to support the government’s budget in 2022, with some describing the decision as reckless.
On a net basis, the BoG last year financed the government to the tune GH¢44.5 billion.
The Governor said the situation of the central bank financing the government, however, became unsustainable by the middle of 2022, hence the decision of the government to approach the International Monetary Fund (IMF) for support.
He said even the technical team from the IMF recognised that the central bank needed to keep the system stable and the economy going.
“They admitted that the financing from the central bank was needed until we had a plan. We have been discussing this plan with the IMF over the last three to six months and finally had a staff-level agreement in December,” he said.
Dr Addison said the plan involved the fiscal consolidation plan, as one leg, and the debt restructuring currently underway, as the second.
“So when people speak as if we have been reckless, I disagree completely,” he insisted.