Dr. Ernest Addison, Governor of the Bank of Ghana, has said that his administration maintained a strong fiscal stance by not financing the budget from 2017 to 2019 and 2021, even though the law allowed up to 5% of the previous year's tax revenue.

According to him, this has helped to lower inflation, reduce the policy rate, and boost growth in the first three years of his term.

He also said that the COVID-19 crisis posed some challenges, such as rising debt and restructuring.

Dr Addison said the Bank of Ghana had to resort to monetary financing for the first time, following the example of many other central banks.

He said this was a difficult decision, but it was necessary to support the government's COVID expenditures.

“We had some good discussions going into it. The Finance Minister [Ken Ofori-Atta] went to Parliament and requested for a suspension of the Fiscal Responsibility Act due to the pandemic. This enabled us to trigger emergency provisions in the Bank of Ghana Act to provide exceptional financing for the government budget. And that’s what we did.”

“For me, it was a big reawakening, because I did not foresee that the Central Bank would be drawn into budget financing. But, given global developments, especially with central banks in advanced economies, it seemed like monetary accommodation of fiscal policy to meet COVID expenditures had become part of the norm.”, he noted.

Dr Ernest Addison also added that the International Monetary Fund also gave additional SDRs, which are central bank assets, to help governments cope with the pandemic.

He explained this meant the Bank of Ghana had to lend these resources to the government, along with invoking the emergency provisions in the Bank of Ghana Act.

The Governor admitted this was hard for him, but it was eased by the government's successful issuance of nearly $3 billion in debt in 2021.

“Even in 2021, the government was able to successfully issue nearly $3 billion in debt. That helped to ensure the central bank didn’t have to provide financing,” he said.

ID/MA

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