<\/p>\n
Former Finance Minister, Seth Terkper, has reignited conversations on Bank of Ghana\u2019s continuous financing of government, saying, it will weaken the bank\u2019s financing position which will be detrimental to the recovery efforts.<\/p>\n
His concerns come on the back of the central bank\u2019s financing of government budget to the tune of GH\u00a222 billion as of the middle of the year.<\/p>\n
Since the emergence of the Covid-19 pandemic, the Bank of Ghana shelved its zero-financing policy to lend to government to help mitigate the impact of the pandemic as well as deterioration of the country\u2019s public finances.<\/p>\n
This resulted in rating agencies downgrades, which in turn, contributed to a protracted lack of access to the Eurobond markets, led to a significant decline in external liquidity and access to the American greenback, thereby, having a significant impact on the local currency\u2019s strength relative to the US dollar.<\/p>\n
Mr. Terkper, at the 11th\u00a0Ghana Economic Forum, said the Bank of Ghana (BoG) has attempted to manage the issue in the short term by financing the budget deficit, but it needs some significant inflows because it has been hemorrhaging.<\/p>\n
\u201cWhat BoG has tried to do, and this is what we have always done, is to manage the crisis in the short term, but they need some inflows because they\u2019ve been haemorrhaging by financing the fiscal deficit. GH\u00a222 billion out of about GH\u00a237 billion deficit, that is two-thirds of the whole deficit is on BoG and this is a country that has come from a zero financing in 2016 to now be financing two-thirds of the deficit which was even as at mid-year,\u201d he said.<\/p>\n
\u201cThe central bank is hugely financing government expenditure, but something has to be done about this in the short-term,\u201d Mr. Terkper said.<\/p>\n
According to the BoG, the budget implementation, using banking sector data, for the first 9-months of the year recorded an elevated overall cash deficit of 6.4 percent of GDP, against the revised programmed target of 5 percent of GDP.<\/p>\n
Total receipts of GH\u00a251.49 billion (8.7 percent of GDP) over the review period, fell short of projected target of GH\u00a260.08 billion (10.2 percent of GDP) and represented 85.7 percent of the budgeted estimate.<\/p>\n
Total payments of GH\u00a289.04 billion (15 percent of GDP) was almost on target, representing 99.5 percent of GH\u00a289.46 billion (15.1 percent of GDP). The deficit of GH\u00a237.56 billion, together with net foreign loan repayments of GH\u00a23.54 billion, created a resource gap of GH\u00a241.1 billion, which was financed from domestic sources and the use of resources from the stabilisation fund.<\/p>\n
IMF projections<\/strong><\/p>\n Ghana\u2019s fiscal deficit is expected to be 9.2 percent of GDP in 2022, according to the International Monetary Fund\u2019s Fiscal Monitor Report from October 2022. It surpasses the government\u2019s revised 6.6 percent estimate from the Mid-Year Budget Review.<\/p>\n The Fund predicted that the deficit would be marginally smaller in 2023, 2024, and 2025, at 8.6 percent, 8.9 percent, and 8.7 percent, respectively. However, it will begin to rise in 2026 and 2027, reaching 9.7 percent and 9.6 percent, respectively.<\/p>\n The primary deficit is anticipated to be 2.1 percent of GDP in 2022. On the other hand, it will decline to 1.1 percent of GDP in 2023 and even lower to 0.0 percent in 2024. This will show that the nation\u2019s ability to raise revenue may be increasing.<\/p>\n Source: B&FT<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Featured Video\n<\/p>\n\n
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