In a haste to explain away their unpopular decision to write-off over GH¢40billion cedis lent to Government, the Bank of Ghana has made nonsense of President Akufo-Addo’s justification for the worsening living conditions of Ghanaians.
President Akufo-Addo, his cousin the Finance Minister, Ken Ofori Atta and appointees have blamed the COVID-19 pandemic and Russia-Ukraine conflict for the economic crisis that has driven the country to the IMF.
The government has insisted on this narrative despite the insistence of the opposition National Democratic Congress and analysts that the situation started in 2019, a year before the COVID-19 pandemic began.
In an interesting twist, the Bank of Ghana has confirmed and backed the position of the opposition and some analysts on the cause of the crisis.
To justify the printing of billions of cedis to support government, the Dr. Ernest Addison led Central Bank in a statement issued on 9 August 2023 said “the problem that Ghana faced” began in 2019.
The Bank said the problem was brought on by over-expenditure on the side of government which necessitated their intervention in 2020 alongside the IMF.
“There was a clear mismatch between revenue inflows and expenditure financed in 2020 by exceptional support from the IMF and World Bank resources, and in addition to financing from the Bank of Ghana through the issuance of the GH¢10billion COVID-19 bond,” the Bank stated
The BoG said despite their intervention in 2020, investors were still dissatisfied with the management of the economy by the Finance ministry led by the President’s cousin, Ken Ofori Atta.
According to the Central Bank, despite the signals from the investor community that they were dissatisfied with the policy measures being championed by the finance minister stuck to his guns and still signaled that through the 2022 budget that he will overspend his revenue by 23% despite imposing more taxes on the Ghanaian in a bid to increase revenue.
“As a result, sovereign spreads on Ghana bonds widened, signaling investor dissatisfaction with the stance of fiscal policy. The Budget for 2022, which was read in 2021, failed to address fiscal concerns as the Budget was even more expansionary by about 23% with a raft of revenue measures to raise financing. As a result, the Credit Rating Agencies further downgraded Ghana’s sovereign debt rating, which blocked Ghana’s access to international capital market borrowing,” The Bank said.
The Central Bank said this lack of confidence in the Finance minister Ken Ofori Atta’s policy direction “triggered a liquidity crisis, spilling over into a balance of payment crisis”.
“External and domestic payments needed to be made, the domestic auction was failing, and the Bank of Ghana had to step in to arrest a major economic and social crisis. In 2 months, the Bank of Ghana had to step in to arrest a major economic and social crisis. In 2 months, the Bank of Ghana lost US$500million in reserves and built significant overdraft with the government as a result of the auction failures” the Central of Ghana stated.
Speaking to Sena Nombo on the Gold Morning Conversation, UK Accounting and Auditing professional Conrad Dumbah said the Bank of Ghana’s latest stance is most revealing and represents a u-turn as they have always backed the government’s earlier posture which involved shifting blame to external developments.
Story: Sena Nombo/Radiogoldlive.com
