Although the Bank of Ghana (BoG) has signed a Memorandum of Understanding (MoU) to ensure zero financing of the government’s budgets, there should be some level of support for the activities of the government by the central bank, Dean of the Business School of the University of Cape Coast Professor John Gatsi has said.
Prof Gatsi however, said that form of support should be situated within the fiscal laws of the country and those laws respected by all players.
His comments come after the Governor, Dr Ernest Addison, is reported to have signed a MoU with the government through the Ministry of Finance to ensure a zero finding of the government budget.
Dr Ernest Addison speaking with centralbanking.com said the MoU was signed by both parties on May 2, 2023.
“The MoU has been finalized and signed,” Governor Ernest Addison said.
Dr Addison is also reported to have told the Financial Times that the MoU took effect on May 1, 2023 and would come into force should the International Monetary Fund approve Ghana’s request for a $3 billion loan facility.
Reacting to this on News 360 on TV3 Monday, May 8, Prof Gatsi said “in the first place, we don’t actually need an MoU, we only need respect for the law. We have a law that states that the lending to the central government by the Bank of Ghana should not exceed five percent of the previous year’s revenue.
“That is to be respected. It is because we are not respecting that, we need to show the IMF proof that we are going to commit to zero financing of government activities. That is why this MoU was occasioned. It is just a sign that we are not adhering to our fiscal laws in the country.”
He added “Also in the earlier IMF agreement that the government inherited, the IMF was asking for zero financing. But in the overall interest of the of government Parliament felt that there should be some level of Bank of Ghana support for the budget if need be, that should not go beyond five percent.
“Really, I do believe that there should be some level of financing of government activities by the central bank but that level of support that the central bank should give to government activities should be respected, and should not go beyond what has been stated.”