The Minority in Parliament has accused the Akufo-Addo led government of breaching the Bank of Ghana act by borrowing GH¢5.5 billion from the central bank to finance the country’s fiscal gap.
According to the Ranking Member of Parliament’s Finance Committee, Cassiel Ato Forson, the move could further increase the levels of inflation in the country.
The funding gap which is in the region of some GH₵17.9billion has been attributed to the economic impact of the novel coronavirus pandemic.
Finance Minister, Ken Ofori Atta on Thursday, May 29, 2020, told Parliament that the government will be relying on both domestic and external partners to finance the deficit.
In his statement on the floor of the House, Mr. Ofori Atta argued that the tight financing conditions compelled the Akufo-Addo led government to turn to its central bank to trigger a GH₵10 billion loan facility in an initiative described as the COVID-19 Relief Bond Programme.
Out of that amount, the Central Bank has already advanced GH₵5.5 billion to the government to meet its financial obligations.
“Given the exceptional circumstances and the challenges, the Minister of Finance, the Governor of the Bank of Ghana and the Controller and Accountant General, as required under Section 30 of the Bank of Ghana (Act 612) as amended, have agreed to trigger the emergency financing provision under the law, which permits increasing the limit on the purchase of Government securities by Bank of Ghana in the event of any emergency, to help finance the residual expenditures,” the Minister said.
“The coupon rate of this loan facility is pegged at the BoG’s prevailing monetary policy rate of 14.5% with a 10-year tenor and a 2-year moratorium on both principal and interest payments,” he added.
But reacting to the borrowing from the central bank, the Ranking Member of Parliament’s Finance Committee, Cassiel Ato Forson, described the move as another ploy by the government to loot state funds to finance its election promises.
Explaining further, the Ajumako-Enyan-Essiam MP said the central bank was engaging in illegality by going ahead to print more money to fund government operations without recourse to Parliament.
“Unfortunately, the cardinal signal is that they want to print another GH¢4.5 billion. This will mean that in 2020, they will end up financing government operations 20 per cent more of the previous revenue and this has never happened in the history of Ghana,” he said.
He also added that per the BoG Act (Act 918), as amended in 2016, the central bank could only lend to the government five per cent of the previous year’s revenue and signalled the intention of the Minority MPs to resist such “illegality by the government.”
“In the 2019 fiscal year, the total revenue was approximately GH¢52 billion and five per cent of this revenue is about GH¢2.59 billion and today, we hear that the central bank has breached its threshold.”
“What they have done is that they have printed, as of last month, an amount of GH¢5.5 billion already and given to the government, breaching section 30 of the BoG Act. The law is clear that anytime you reach that limit, you come to Parliament,” Mr. Forson posited.