BoG Overdraft necessary as govt works to put IMF Programme in place – Analyst

A Financial Analyst, Mr Johnson Ameyaw has said that the Bank of Ghana (BoG) overdraft to the Ministry of Finance, will go a long to help the country as the government seeks a programme under the International Monetary Fund (IMF).

It is recalled that the Monetary Policy Committee (MPC) of the BoG at its emergency meeting on Wednesday August 17 said that the execution of the budget for the year has remained challenging.

Revenue has not kept pace with projections and created financing challenges.

In the absence of access to the international capital market and given the constrained domestic financing, central bank overdraft has helped to close the financing gap as reflected in the mid-year budget review.

“The Bank of Ghana is working with the Ministry of Finance to agree on a cap on the overdraft,” the Governor of the Bank of Ghana (BoG) said at the meeting.

But the Minority in Parliament raised issues against this.

They said the BoG’s overdraft is the same as monetary printing in the technical sense, which BoG denied earlier as per its statement dated July 26, 2022.

“Second, given that BoG is now ‘working with the Ministry of Finance to agree on a cap on the overdraft”, BoG is acting in utter disregard for provisions in the Bank of Ghana Act, 2002 (Act 612) and the Bank of Ghana (Amendment) Act, 2016 (Act 918).

“There is nowhere in Act 612 or Act 918 where BoG is mandated to arbitrarily grant central bank overdraft when there is lack of access to the international capital markets coupled with constrained domestic financing, Parliament has oversight and must mandate such an exceptional financing of government by the central bank before execution.

“In any case, Section 6 of the Bank of Ghana Act, 2002 (Act 612) and Section 7 of the Bank of Ghana (Amendment) Act, 2016 (Act 918) clearly signal the prior involvement of Parliament in such extreme circumstances.”

But the Financial Analyst, Mr Ameyaw further explained that because government is paying debts, it needs funds to ensure payment of salaries.

In his view, even Members of Parliament would not have been able to receive their salaries but the overdraft.

“Without BOG overdraft nobody would have received salaries including parliament,” he also said in an exclusive interview with 3news.com on Friday August 19.

He added “Once government pays for debt service domestic revenue is exhausted. Overdraft is necessary while the Government works to get IMF programme in place.”

“I think we should rather commend the BoG. Parliament is on recess. I am very sure the Ministry of Finance will engage Parliament when they resume,” he added.