Ignore Dr Kwakye and co, Bank of Ghana stepped in to prevent economy from destabilizing – Financial Analyst

A financial analyst, Johnson Annan has called on Ghanaians to ignore the commentaries by the Director of Research at the Institute of Economic Affairs (IEA),Dr. Kwakye and others who have criticized the Bank of Ghana(BoG) for supporting government expenditure in 2022.

The BoG received flak from critics including Dr Kwakye who said the central bank’s action was wrong.

But Mr Annan indicated that the BoG’s decision to finance government expenditure last year, has ensured that there is stability in the country stating that the economy would have been destabilized if the BoG had not stepped in.

“We are all enjoying the fruits of the central bank’s support. There are no queues for fuel in the country. We are all going about our normal business so you don’t understand what the situation would have been..We would have experienced chaotic situations in the country, with no petroleum imports, pharmaceuticals etc. I think we should commend the Governor Addison-led administration for ensuring that there is no chaos in the country,” he said in a write-up.

He added “When you are in a crisis, you need to take bold decisions and measures that ensure stability and not wait for approvals. Human lives are at stake.

“Parliament is in session now and l believe the Honourable Minister should quickly brief parliament on BoG’s financing of the budget and the new limits.”

Governor of the Bank of Ghana Dr Ernest Addison justified the BoG’s action.

“We need to remember where we are coming from at the beginning of 2022 when we lost access to the capital market,” said Dr. Addison at the SIGA annual stakeholder meeting in Kwahu Abetifi.

“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,” he added.

Dr Addison further stated that the revenue measures were not successful, leading to financial trouble for the government.

“In addition to that, the revenue measures were not working, with the revenue projections performing below targets,”  he said.

He added “All those meant that government finances were in trouble, as expenditures needed to be funded, but there was no money.”

According to Governor, the central bank stepped in to prevent the economy from destabilizing and coming to a standstill. “It is important to recognize 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 stated.

The Governor explained that the situation became unsustainable by mid-2022, leading to the government’s decision to seek support from the International Monetary Fund (IMF).

“They admitted that the financing from the central bank was needed until we had a plan,” said Dr. Addison. “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.”

The plan, according to Dr. Addison, involves fiscal consolidation and debt restructuring. “So when people speak as if we have been reckless, I disagree completely,” he said.

One of the key objectives of the IMF programme, according to Dr. Addison, is to ensure that the revenue and expenditure plan for 2023 does not require central bank financing, making the central bank’s interest rate policy more effective.

Source: By Laud Nartey

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