The Bank of Ghana (BoG) has clarified that it used GHS25billion to finance the Government’s maturing debts on the domestic market contrary to claims of using GHS70 billion.
The Central Bank in a press release copied to the Ghana News Agency on Friday denied the claims by the Member of Parliament (MP) for Bolgatanga Central, Isaac Adongo, describing the allegation as “false and unfounded.”
The Legislature in an interview on Tuesday, November 8, said the Governor of BoG, Dr Ernest Addison, had illegally given over GHS70bn to the Government to finance maturing debts on the domestic market, a move he said was against the Public Financial Management Act.
However, the Central Bank in the press release said that it had used GHS25.6bn as of October 2022, to finance government’s maturing debts, though it had increased currently to 40.2bn.
According to the Central Bank, the GHS 40.2bn stock of government debt reflected an accumulated claims for over twenty years, including legacy assets such as the Telecom Malaysia Bonds issued in relation to the privatization of Ghana Telecom and Tema Oil Refinery Bonds.
“There are strict rules on which the Government of Ghana can borrow from the Bank of Ghana, and the strict rules are quite clear, stating that the Bank of Ghana at any point in time should not lend more than five per cent of the previous year’s revenue,” the statement said.
Providing details on what had resulted in the accumulated stock of government debt, the Bank noted that in the first quarter of 2022, Ghana’s credit rating was downgraded and effectively shut out of the International Capital Markets.
It said that consequently, there were no inflows from external sources to support budget implementation and the government started experiencing unsuccessful auctions on weekly basis.
“In the process, the Bank of Ghana had to step in and provide financing to keep government machinery running, and in particular, help prevent a domestic debt default situation,” BoG said.
The Bank further said that: “This activity is clearly shown in the Overdraft line, which stood at GH¢25.6 billion as at October 2022.”
“This support is temporary and consistent with crisis management as we work with the International Monetary Fund to design a debt operation that will lift the burden of debt servicing off the budget,” it explained.