The Bank of Ghana has provided clarity on the GH¢22.5 billion support it extended to government in 2020 following misgivings by some members of Parliament that the move is a breach of the law.
According to the Director of Research of the Central Bank, Philip Abradu-Otoo, nothing unlawful has been done in making the funds available to government, as the total amount include funds from two programmes under the International Monetary Fund (IMF) and money to support the Consolidated Bank Ghana (CBG).
In a statement copied to the B&FT, Mr. Abradu-Otoo said GH¢10 billion of the cash represented the amount that was executed within the law under the Asset Purchase Programme which allows the Central Bank, the Ministry of Finance, and the Controller and Accountant General to meet to decide on the limit of borrowing to be made by Government.
The law further states that upon agreement of the limit, parliament should be informed, which according to him, was duly done. The bank subsequently paid the amount to government in two tranches, first, a GH¢5.5 billion in May 2020 and a GH¢4.5 billion in September same year.
Following that, the Director of Research added, the IMF Rapid Credit Facility of US$1 billion that was provided to the government to help deal with the COVID-19 pandemic situation was lent to BoG and the bank, in turn, further on-lent this facility – GH¢5.6 billion – to government. The IMF at the time of disbursement of the facility indicated that this was to be treated as budgetary support.
He explained further that the Extended Credit facility Programme which begun in 2015, expired in 2019. However, resources from the completion of the 7th and 8th review of the programme were made available to government by the IMF in December 2019. Government’s accounts were credited with the cedi component of the facility in the first quarter of 2021.
“The IMF indicated that the resource was to be applied as budgetary support which resulted in a claim of GH¢980 million being raised by the Central Bank against government,” he said.
Again, he explained, to support smooth operational efficiency at Consolidated Bank Ghana Ltd and to help pay off depositors who had their funds locked with Microfinance Finance Institutions (MFIs) and Finance Houses, the Bank of Ghana took steps to monetize CBG’s holdings of Financial Sector Bonds.
With regards to this, Mr. Abradu-Otoo said, the Bank of Ghana took hold of bonds held by CBG and provided CBG with liquidity to meet its obligations. This was charged to government and the BoG raised a claim to the tune of GH¢5.1 billion on government.
Then, the last component of GH¢925 million, he said, represented interest payment due the Bank of Ghana from government. However, due to financing challenges fostered on government by the pandemic, the payment of this amount proved difficult, hence, the amount was securitised and a corresponding BoG claim was raised on government.