Zero financing of government’s budget by BoG will hurt economy – Economist

Economist Dr Adu Owusu Sarkodie is kicking against the implementation of zero financing of the government budget by the Bank of Ghana (BoG).

Dr Sarkodie maintained that looking at the current structure of the economy and the financing challenges facing the economy, the country should have up to 5 per cent of Central Bank financing of the government’s budget.

He disclosed this on PM Express Business Edition with host George Wiafe on August 10.

Dr Sarkodie said government owns BoG and everything must be done to ensure that when the country is in crisis, the Central Bank should be able to support the economy.

He added that “I was one of those who wrote and spoke against it when Ghana secured a programme with the IMF in 2025 and one of the conditions was the Zero Financing of Government’s Budget”

“There should be some limit when it comes to the financing of government’s budget, but for zero financing looking at the current state of the economy,” he added.

BoG ended last year recording GH₵‎60 billion loss, mainly due to the Central Bank’s participation in the Domestic Debt Exchange Programme (DDEP) which has led to some pushing for strict enforcement of the Zero Financing Policy of the government’s budget.

But Dr Sarkodie insists the economy is not ready for a Zero Financing of government expenditure.

Commenting on BoG’s loss for 2022, the economist rejected claims that it was out of place for the Bank of Ghana to step in and support the economy in 2022 when it was struck with COVID-19.

Zero Financing Programme by Bank of Ghana

The Bank of Ghana earlier this year started enforcing the zero financing of Ghana’s budget.

This was one of the conditions that was needed to help Ghana secure an IMF programme this year.

The Bank of Ghana and the Ministry of Finance have already signed a Memorandum of Understanding (MoU) to aid the implementation of this policy.

BoG had told Joy Business that over the past seven months in 2023, it has not extended any support to the government to support its budget.

The Bank of Ghana has maintained that it remains resolute in enforcing the Zero Financing Policy when it comes to financing Government’s Budget.

This is one of several measures that they are implementing to help return the Bank to a positive equity position.

Private Sector on Zero Financing of Government’s Budget

Speaking on the same programme, the president of the Association of Ghana Industries (AGI), Dr Humphrey Ayim-Darke said he is also opposed to the full implementation of the zero financing of the Budget.

He explained that this is because of the expected impact on the larger economy and how that could affect the operations of the private enterprises in the country.

Dr Ayim-Darke maintained that there should be some level of support for government.

“Maybe, we can up at up to 5 per cent of the previous year’s revenue mobilised by the Ghana Revenue Authority (GRA)” he said.

Dr Ayim-Darke was, however, worried about the current tax levels in the country and maintained that something must be done “to deal with the concerns of Businesses because of how this could affect most enterprises.”

“We were recently at a meeting where one beverage firm disclosed that they are paying about 70 per cent of its revenue as taxes to the state,” Dr Ayim Darke has disclosed.

He added, “We know that government needs money to grow the economy, but we don’t think that it should be done in a way that is seriously affecting businesses that are always committed to meeting their tax obligations to the state.”

Source: Joy Business

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