The BoG has funded the government budget to the tune of GH22 billion as of the middle of 2022, which has led to Mr. Terkper’s concerns.
The former finance minister said that the Bank of Ghana (BoG) has tried to handle the problem in the short term by funding the budget deficit, but it needs some big inflows since it has been hemorrhaging. He was speaking at the 11th edition of the Ghana Economic Forum.
“The BoG has attempted to manage the problem in the near term, and this is what we have always done, but they need some inflows because they have been hemorrhaging by supporting the budget deficit.
Two-thirds of the country’s deficit, or approximately GH22 billion out of a total deficit of around GH37 billion, is financed by the BoG. “This is a country that has gone from zero financing in 2016 to now being financing two-thirds of the deficit which was even as at mid-year,” he said.
There must be immediate action taken to address the central bank’s massive financing of government spending, according to Mr. Terkper.
Since the Covid-19 pandemic’s appearance, the Bank of Ghana has suspended its zero-financing policy in order to lend to the government and lessen the pandemic’s effects as well as the degradation of the nation’s public finances.
Rating agencies downgraded the country’s debt, which contributed to a protracted lack of access to the Eurobond markets, caused a major loss in external liquidity, made it harder to access the US dollar, and had a big impact on how strong the local currency was compared to the US dollar.
In contrast to the reduced scheduled target of 5% of GDP, the budget implementation for the first nine months of the year, as reported by the BoG, showed a significant overall cash deficit of 6.4 percent of GDP.
The review period’s total receipts of GH51.49 billion (8.7% of GDP) fell short of the planned target of GH60.08 billion (10.2 percent of GDP) and accounted for 85.7% of the budgeted estimate.
Total payments of GHC 89.04 billion, or 99.5% of GHC 89.46 billion, were nearly on schedule at 15% of GDP (15.1 percent of GDP).
A resource gap of GH41.1 billion was formed by the deficit of GH37.56 billion, net foreign loan repayments of GH3.54 billion, and the use of domestic resources and stabilization fund resources.
The greatest time to convert Ghana’s economy into one that is strong and resilient is right now, according to other experts at the Ghana Economic Forum.