The Bank of Ghana has clarified its role in financing the government during periods of economic distress, highlighting the necessity of such interventions in light of external and internal shocks.
In specific instances, the Central Bank provided essential financial aid to the government, underlining the extraordinary circumstances that warranted these actions.
In 2020, grappling with the profound impacts of the Covid-19 pandemic, the Bank extended GH¢10 billion in support to the government. This move facilitated the launch of the Covid-19 Pandemic Bond, reflecting the unique exigencies of the situation.
Additionally, the Central Bank provided GH¢37.9 billion as budget support in 2022, aiding the government in salary payments and addressing debt maturities. The capital market’s closure to Ghana accentuated the need for this intervention.
The Bank of Ghana asserted that its actions were justified given the severity of the challenges facing the economy. It contextualized these measures within the broader framework of crisis management, highlighting the government’s precarious financial situation, loss of access to international capital markets, and underperformance of domestic revenue.
These factors compelled the government to seek International Monetary Fund (IMF) support, suspend the Fiscal Responsibility Act, and necessitated the Central Bank’s role in stabilizing the economy.
Responding to criticism about the Bank’s financing activities, Majority Leader Osei Kyei Mensah-Bonsu emphasized that the law does not mandate the Bank of Ghana to report daily activities to Parliament.
He clarified that the Bank is required to report foreign exchange receipts to Parliament, a duty which the Bank has consistently fulfilled. Furthermore, the suspension of the Fiscal Responsibility Act by the Parliament in 2020 was a response to the crises triggered by the Covid-19 pandemic, indicating a flexible approach in extraordinary circumstances.
The Bank of Ghana affirmed to Parliament, the necessity of its actions during times of economic turmoil and underscored the pivotal role these measures played in averting potential defaults and maintaining economic stability. The unique challenges posed by external and internal shocks necessitated responsive and adaptive policy choices, underscoring the importance of pragmatic decision-making in the face of the crisis.