Former Finance Minister, Seth Terkper, has said that the central bank should remain firm in its previous stance against budget deficit financing post Coronavirus pandemic.

The former Minister says the Bank of Ghana must not “bring back the ghost of ‘deficit or ‘budget financing,” because in the 1970s and 1980s when that happened it turned out to be detrimental to the economy.

“On occasions, BoG’s balance sheet has been impaired in the process and needed to fixing by the government. The frontloading of Public Debt that includes the full use of its IMF quota, early in the COVID-19 era, is worrisome since there is no prediction yet about when it will end. Ghana economic performance under the ECF Program was exceptional by African standards but the rush with which applied for the RCF loan not being followed by most ‘weaker’ African states," Mr Terkper said in the second part of his sequel on the central bank’s Monetary Policy Committee Statement released last month.

Mr Terkper believes that given the varied experiences under the ECF [Emergency Credit Facility] Phases I and II, the IMF must develop crisis intervention guidelines for monetary and other interventions.

“COVID-19 is unique, with measures such as lockdowns, border closures, face masks, strain on health facilities, and social distancing rules that exacerbate its health and economic effects. The call for ‘crisis guidelines’ is due to virtually conventional impact (though different in significance) of financial and non-financial crisis on developing countries: fall in aggregate demand in advanced economies [and elevated supply-chain disruptions]; consequential fall in demand for commodities and fall in their prices; fall in foreign currency flows and reserves; loss of fiscal revenues; and loss of production and employment,” Mr Terkper surmised.

In Mr Terkper’s first article, he raised concerns about what he says is the recent aggressive fiscal stance taken by the Bank of Ghana in the wake of the COVID-19 pandemic.

Citing the May 2020 MPC statement, the former Minister said it was clear that the BoG has significantly shifted its past conservative fiscal stance to an aggressive one.

In that article, the Minister also cites what he says are anomalies in the central bank’s support and commitment to the government.

He said a total of GH¢15.877 billion fiscal support that has been earmarked for government, some of which have already been released, works out to over 53% of the fiscal balance of GH¢18.888 billion in the 2020 Budget.

Read below the second part of Mr Terkper's article on the subject, titled: ‘BoG May 2020 MPC Statement: Reversal of BoG’s stance on [Budget] Deficit-Financing